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2010

the RUSSIA oil & gas competitive intelligence report

“Well Positioned for Global Recovery”

published by Business monitor international ltd.

RUSSIA OIL AND GAS COMPETITIVE INTELLIGENCE REPORT 2010
Part of BMI's Industry Report & Forecasts Series
Published by: Business Monitor International Publication Date: October 2010

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Russia Oil and Gas Competitive Intelligence Report 2010

© Business Monitor International Ltd

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..................................................................... 41 Strategy ............................................................................................................................................................................................................................................................................................................. 47 Strategy ........................................................... 22 Latest Developments .............................................................. 7 Licensing And Regulation ....................................................... 7 Government Policy ............................................................................................................................................................................... 33 Latest Developments ................................................................................................................... 31 Rosneft ...................................................................................................................................................................................................................................... 51 Russneft............................ 32 Strategy ................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................ 24 Gazprom Neft (formerly Sibneft) ................................................................................................................................................................................................................................ 21 Gazprom ........... 53 Market Position ............................................................................Russia Oil and Gas Competitive Intelligence Report 2010 CONTENTS Competitive Landscape Analysis ......................................................................................................................................................................................................................................................................................................................................... 46 Total............................... 29 Market Position . 22 Strategy ....................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 51 Latest Developments ....................................................................................................................... 14 Oil Transit .................................................................................................................................................................................................................................................................................................... 10 Gas Transit ................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 37 Latest Developments ................................................................................................................................. 46 Latest Developments ............................................................................. 19 Key Downstream Players..................... 54 © Business Monitor International Ltd Page 3 .................................................... 9 International Energy Relations ............................................................................................................................................................................................................................................................................................................................................................................................. 5 Table: Key Domestic And Foreign Companies In The Russian Oil And Gas Sector .................................................................................................................. 54 Recent Developments ............................................................................................ 32 Market Position ................................................................................................................................................................................................. 48 Latest Developments ............................................................................................................................................................................................................................................................................. 47 Market Position .................................................................................................................................................................................................................................................................. 40 Market Position .................................................................. 45 Market Position .... 53 Strategy ............................................................................................................. 48 Novatek .......................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 21 Market Position .............................. 36 Market Position ................................................................................................................................................................................................................................................................... 18 Table: Key Upstream Players .......................................................................................................................................... 42 Tatneft ........................ 50 Market Position .................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 38 TNK-BP ........................................................................................................................................................................................................................................................................................................................................................... 30 Latest Developments ................................................................................................................................................................................................................................................................................................................................................................ 46 Strategy ................................................................................................................................................................. 20 Company Profiles ....... 6 Overview/State Role............................................................................................. 50 Strategy ......................................................................................................................................................................................................................................................................................................................... 33 Lukoil ............................................................................................................................................................................................ 30 Strategy .......................................................................................................................................... 37 Strategy ................................. 41 Latest Developments ..........................................................................................................................................................................................................................................................

................................................................................... 59 BP – Summary .............................................................................................................................................................. 74 SWOT Analysis ........................................................................................Potential Returns.................... 83 Russia Downstream Rating -........................................................................ 67 Oil Refineries .. 57 ExxonMobil – Summary .................................................... 78 Central/Eastern Europe Region .............................................................................................................................................................................................................. 56 Itera – Summary ...................................................................................................... 77 Russia Business Environment SWOT .................................................... 81 Downstream Scores .................................................................................................................. 60 Irkutsk Oil Company – Summary ................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................Overview .................. 61 PetroNeft – Summary ............................................. 58 Sakhalin Energy – Summary ................................................................................................................................................................................................................................................................................................................................ 84 © Business Monitor International Ltd Page 4 ................................................................................................................................................................. 57 Transneft – Summary ................................................................ 72 Gas Pipelines ................................................................Risks To Potential Returns . 70 LNG Terminals .................................................................................................................................................................................................................................................................................................................................................................................................... 57 Royal Dutch Shell – Summary.................... 62 Others – Summary .................................................................................................................................................................... 80 Table: Regional Upstream Business Environment Rating....................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 61 Alliance Oil – Summary ............................................................................................................................................................................... 77 Risk-Reward Ratings .......................................................................................................................... 80 Russia Upstream Rating -......................................................... 69 Oil Terminals/Ports ..................................................................................................................................................................................................................................................................................................................................... 82 Table: Regional Downstream Business Environment Rating ..................................................... 59 Lundin Petroleum – Summary...................................................................................................................................................................................................................................................................................Overview ........................................................................................................................................................................................................................Russia Oil and Gas Competitive Intelligence Report 2010 Surgutneftegaz – Summary............................................................................................ 81 Russia Upstream Rating -.................................................................................................. 79 Upstream Scores ................................................Risks To Potential Returns ..................................................................................................... 81 Russia Upstream Rating -.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 58 Wintershall – Summary ............................................ 70 Oil Pipelines .................................................................................................................................................................Potential Returns ............................ 64 Russia Energy Market Overview . 83 Business Development Directory ................. 56 Sistema – Summary ............ 60 Aladdin Oil & Gas – Summary .............................................................................................................................................................................................................................................................................................................................................................................................000b/d Capacity Or Greater In Russia .................................................................................................... 60 OMV – Summary.......................................................................................................................................................................................................................................................................................................................................................................................................................................... 62 Market Attractiveness Analysis ................................................................................................................................................................................................. 64 Oil & Gas Infrastructure ............................................................................................ 78 Composite Scores......................................................................................................................... 67 Table: Refineries Of 50................................................................................................... 78 Table: Regional Composite Business Environment Rating ............................................................................................................................................................................................................................. 83 Russia Downstream Rating -......................................... 82 Russia Downstream Rating -............................. 78 Business Environment Ratings .....................................................................................

ExxonMobil. one of the largest independent producers. • Many leading domestic independents. the Finance Ministry included the country's largest oil producer in the list of nine companies earmarked for partial privatisation in 2011-2013. The group has an estimated 18% share of refining capacity and 1.16% of Rosneft could be sold. which is the main IOC interest. TNK-BP and large regional producers such as Tatneft and Bashneft. such as Russneft and Urals Energy. • Lukoil’s oil output in January-September 20009 totalled around 1. threatened by takeovers from the state-run majors owing to debt over-exposure. State-run Rosneft is the main producer. • The Russian government has moved forward its plans to privatise a larger share of Rosneft. • BP has shares in the TNK-BP venture. BP is boosting its Russian focus following the Macondo spill. following the acquisition of Yukos’ assets in 2007-2009. leaving the state with the 51% controlling stake. • Surgutneftegaz’s 2008 crude production was 1. have been fashioned by high-profile businessmen in the wake of the state asset sell-off in the 1990s. Gazprom produced 462bcm. while gas output totalled 14. after the company's investment in Lukoil failed to meet expectations. however. • US major ConocoPhillips is selling its entire 20%Lukoil stake. are not too far behind.83mn b/d. • The oil sector is more diversified. but privately owned Surgutneftegaz. On July 26. Lukoil. The decision fits ConocoPhillips' stated asset divestment plan. first announced in October 2009. often in non-oil-related activities. In 2009. but overall inter-company competition is more limited than it would initially appear. the lowest level in history.000b/d Kirishi oil refinery and around 300 service stations in north-western Russia. Downstream assets include the 400. © Business Monitor International Ltd Page 5 . Royal Dutch Shell and BP are members of consortia developing the Sakhalin fields.24mn b/d. Sibir Energy.Russia Oil and Gas Competitive Intelligence Report 2010 Competitive Landscape Analysis • The Russian gas industry is dominated by Gazprom. Up to 24. Gazprom’s oil arm Gazprom Neft is now a major producer.815 service stations in Russia. which is effectively a downstream gas monopoly that also accounts for around 84% of upstream production. was taken over by Gazprom Neft in mid-2009. The degree of private companies’ connections with the Kremlin varies. The company first denied any Lukoil divestment and then said only 10% will be sold. They are now.1bcm.

5% E. ARR Employee-owned 100% Gazprom 75.2% state 36% Tatarstan govt 75% Basel e = estimate.7* 34.ON Ruhrgas 20. 50:50 BP. of employees 445.108 55.2 46.Russia Oil and Gas Competitive Intelligence Report 2010 Table: Key Domestic And Foreign Companies In The Russian Oil And Gas Sector Company Gazprom Lukoil TNK-BP Surgutneftegaz Gazprom Neft Rosneft Tatneft Russneft 2009 Sales (US$bn) 116.5 4.8 7.7 18.5* % share of total sales na na na na na na na 30e No.342 59.000 na Year established 1992 1991 2003 1993 1995 1993 1955 na Total Assets (US$mn) na 59.1% state.837 na na Ownership (%) 91. Alekperov. na = not available/applicable.000 104.06% Other mngt. BMI. 2. 12.000 150.632 11.093 na 8.6% V.0* 24.1* 107.000 74.300 86. Source: Company data 2009.000 90. *2008 figures © Business Monitor International Ltd Page 6 .

Rosneft said in November 2009 that it expects the tax holiday for East Siberian fields.Russia Oil and Gas Competitive Intelligence Report 2010 Overview/State Role The oil sector is concentrated in the hands of several domestic companies. Meanwhile. distribution. while tax exemptions for producers in the Sea of Okhotsk in the Far East would be granted for up to 15 years or until 30mn tonnes (220mn bbl) of oil have been produced. Second. although domestic gas prices are being very gradually adjusted to international levels. Surgutneftegaz and TNK-BP. Verknechonsk and Talakan. although the main Russian producers are increasingly venturing abroad directly. plus privately owned Lukoil. by an amount equivalent to 60% of the crude export duty. The third and final measure being considered is an increase in the gasoline excise tax by RUB1 per litre over the period 2011-2013. the export duty holiday on the main East Siberian oil fields will remain in place in 2010 but may be revoked in 2011. There were plans to merge Gazprom with Rosneft. exporters and refiners are state-run Rosneft and Gazprom Neft. The proposed MET increases will be inflation-adjusted. which dominates production and holds a monopoly on exports and. © Business Monitor International Ltd Page 7 . According to Vedomosti's sources. Surgutneftegaz. equivalent to US$37. the field depletion rate. and the US$/RUB exchange rate. Licensing And Regulation There are three proposed changes to Russia's tax structure. to last until 2013-2015. which includes Vankor. the Kremlin scrapped export duty on 13 main East Siberian projects and all projects in the Black and Okhotsk seas. The biggest crude producers.10/bbl. with the increase in the gas MET having been set at 61%. the tax exemptions for Black Sea production have been granted for up to 15 years or until 20mn tonnes (146. The MET rate is currently RUB419/tonne. namely Rosneft. TNK-BP and Tatneft. Following US major ConocoPhillips’ divestment of its 20% stake in Lukoil in 2010. with limited direct IOC involvement.7mn bbl) of oil have been produced. The government currently plans to end the duty in 2011. a process that started in the mid 2000s. but the deal was abandoned. the re-introduction of export duties on East Siberian crude would cost the major producers in the region. Gas activities are controlled by national giant Gazprom. On December 1 2009. bringing significant savings to the industry. over US$2bn in total. in practice. The oil export duty for fields elsewhere in Russia increased by 17% in December 2009 to US$271/tonne. Russia intends to increase the mineral extraction tax (MET) for both oil and gas production. According to anonymous government and industry sources cited by Vedomosti in March 2010. Russia has proposed increasing the tax on refined products exports. from the beginning of 2011. the gas trunklines by Gazprom. First. adjusted according to the price of Urals crude. Foreign upstream oil ventures traditionally have been carried out through the Zarubezhneft state vehicle. The oil pipeline system is managed by staterun Transneft. BP is the only foreign palyer with a large interest in Russian oil producers through the TNK-BP JV. Restructuring has been discussed for years with little progress.

Third. Russia has been assessing ways to source extra cash to offset declining revenues in the recession. However. has also been calling for an export tax holiday for offshore fields. © Business Monitor International Ltd Page 8 . According to the country’s Finance Minister Alexei Kudrin. Second.2mn b/d by 2013.6) per thousand cubic metres (mcm) to RUB162/mcm and to increase the gas export duty from 30% to 35%. Prime Minister Vladimir Putin said he would consider Alekperov's request and in July 2010 Lukoil said that it had reached a preliminary agreement with the finance ministry to halve export duties on North Caspian oil. Such a revenue-based system is effective for rent collection and works well for mature projects with low finding. are unlikely. According to the Ministry of Natural Resources and Environment (MNRE). with the tax burden exceeding 68% of their gross revenue. The Finance Ministry had therefore proposed to increase the tax on gas production from RUB147 (US$4. Lukoil's president. development and lifting costs but fails to encourage new developments. it is unlikely to have an impact on the progress of East Siberian upstream developments in the short term. the MET and export duties account for about 95% of oil producers’ tax payments. the country could increase production to a sustainable 10. First.Russia Oil and Gas Competitive Intelligence Report 2010 While the policy shift would reduce the profitability of the fields. the shallow waters in the North Caspian do not present the same logistical and technological challenges as the remote East Siberian deposits. which would stand to be the main beneficiary of any further tax breaks. its own projections show production falling to 9mn b/d by 2013. the fiscal incentive currently enjoyed by operators in East Siberia. Vagit Alekperov. Any lasting fiscal concessions. The amendment to the tax code. agreed in May 2008. increased the tax-free MET threshold from US$9/bbl to US$15/bbl. At the Yuriy Korchagin opening ceremony. however. To stimulate projects in the Caspian Sea. It was estimated that the government would yield an additional RUB60bn (RUB53bn via export tax and RUB7bn via extraction tax) through the suggested tax increases. this would allow oil producers to save over US$4bn annually. The ministry estimates that if Russia implements the new fiscal measures. Lukoil. the Russian government reduced MET to encourage the reinvestment of corporate profits into E&P. If it does not reform its tax framework. the Russian finance ministry is strongly opposed to any further loss of state revenue through concessions to oil companies. both of which are big East Siberian players. the first annual decline in eight years. On January 1 2009. In July 2009 the Russian government announced that it would not increase gas production and export taxes as had been earlier suggested by the Finance Ministry. most of which would be paid by Gazprom. does not enjoy the same influence in the Kremlin as its state-connected rivals Rosneft and Surgutneftegaz. which occurred despite a 30% increase in upstream capex. Russia has exempted the first 730mn bbl of oil produced in the region from mineral extraction tax. however. The structure of the tax regime was partly responsible for the fall in the country's oil production in 2008.

Under a plan drafted by the ministry. the government would look into the issue at a later stage. a rate that Donskoy claimed would mean ministry targets for offshore areas would take 165 years to fulfil. especially after a downward revision of the August 2009 draft. according to a report by the Moscow Times newspaper in March 2010.9bn at 2010 rates) in E&P offshore Russia in 2008. The plan. In the Moscow Times article Donskoy claimed that the NREM believes Gazprom and Rosneft have insufficient resources to develop Russia's continental shelf on their own. It is arguable that this has damaged Russian investment in offshore areas. offshore fields in Russia can only be developed by companies in which the government owns a stake of 50% or greater. is unlikely to be sufficient. The report. The level of capex outlined in the plan. an import tariff should be introduced. Gazprom has successfully managed to fend off attempts by the Finance Ministry to increase its tax burden by arguing that it already faces extremely high new-generation E&P costs. The two companies invested only RUR56. In addition. Putin has responded to Gazprom's proposal saying that as the introduction of import tariffs were 'not just an economic question'. however.4bn (US$1. the newspaper also reported that it is unclear whether the proposal has been submitted to the Russian cabinet. the government wants an annual investment of US$28. Taxing the gas that Gazprom purchases from Central Asia (and resells to Europe) would likely cost the company less as the volumes it buys from abroad are significantly lower than its domestic output. Gas production goals look extremely ambitious outright given the current volumes and dynamics of the global supply and demand.7mn b/d of oil and 885-940bcm of gas by 2030. which cited deputy energy minister Sergei Donskoy. Exports of crude and oil products are expected to rise to 6. To achieve the set output growth. Offshore Exploration Russia may relax rules effectively limiting offshore E&P in the country to Rosneft and Gazprom.6mn b/d while gas sales abroad are to reach 349-368bcm by that year. Most of the extra gas exports are expected to be absorbed by Asia. said the proposal would allow subsidiaries of the two companies to join them in offshore exploration and could lead to IOCs also becoming involved. © Business Monitor International Ltd Page 9 . Government Policy Under the Energy Strategy 2030. companies applying to work on the fields must have a five-year record of working on such projects. The oil output target is theoretically achievable. Under legislation passed in 2008. This time. drafted in August and approved in November 2009.6-10. the companies would be allowed to share access with their subsidiaries and could farm out a stake of up to 50% in offshore projects to foreign companies. Russia is expecting to sustain its oil output at roughly 2009 levels and dramatically boost gas production. However. calls for annual production of 10. effectively limiting participation to Gazprom and Rosneft. Gazprom has suggested that rather than increasing tax on production and exports.4bn (late 2009 exchange rate) in the oil sector and US$27bn in the gas sector. The proposal would also allow any of the subsidiaries to develop offshore fields on their own or in partnership with other companies.Russia Oil and Gas Competitive Intelligence Report 2010 In the past.

the Federal Financial Markets Service (FFMS). and therefore must.16% of Rosneft could be sold. leaving the state with the 51% controlling stake. The head of the FFMS said at the time that the companies’ shares can. under the terms of a previous © Business Monitor International Ltd Page 10 . According to Platts. they argued that the overall debt volume of the Russian energy sector was around US$80bn and required state action. they may not be enough on their own to help Russia's major oil producers ride out the current crisis.5bn) for the treasury.Russia Oil and Gas Competitive Intelligence Report 2010 The government is moving forward plans to privatise a larger share of Rosneft. In particular. A non-controlling stake in Transneft may also be sold. Russia's main producers collectively approached the Kremlin for assistance. the Rosneft stake could provide around RUB500bn (US$16. In July 2010. Although the companies did not specify the required sum. Each of the major companies is therefore also adopting its own strategies to minimise the negative repercussions of the economic downturn. the Finance Ministry included the country's largest oil producer in the list of nine companies earmarked for partial privatisation in 2011-2013 in an attempt to eliminate the budget deficit. This will push Russian companies to raise finance at home. the MoU will look at ways of supplying South Korea with gas from the Sakhalin projects. and other ‘strategic’ industries. Russia’s state market regulator. adding that all the necessary conditions to enable that process were in place. be traded in roubles in Russia. International Energy Relations South Korea Gazprom and its South Korean counterpart Kogas signed an MoU in June 2009 to jointly study the options for delivering Russian gas to South Korea. As the jewel in the Russian state sector's crown. only 5% of the energy companies’ total sales are allowed to come from operations in foreign countries. Although these moves will be supportive. under the new rules. in line with President Dmitry Medvedev’s plans to turn Moscow into a major financial centre by 2020. privatisation and regulatory structure. Up to 24. Moreover. TNK-BP and Rosneft plus Gazprom’s Deputy Chairman Alexander Ananenkov wrote to Prime Minister Vladimir Putin asking for state credit ‘to pay for foreign debts’. The government has signalled its intention to provide US$50bn from Russia's gold and foreign exchange reserves to help refinance domestic corporations' foreign debt and grant selected tax holidays. As the extent of the global economic meltdown became clear in September 2008. or half the overall divestment target. The companies also requested Putin to order the finance ministry and the central bank to work out a mechanism of financing strategic projects with the help of 'state targeted credits'. although government officials have been given conflicting signals. can list abroad. The ruling is the most explicit recent step in the Kremlin’s programme of consolidating control over Russia’s mineral resources and suggests further downside risks to an investment climate already marred by a poor licensing. put a 25% cap on the proportion of shares domestic mineral resources companies. The CEOs of Lukoil. In July 2008.

The numerous difficulties with both pipeline options suggest to us that no concrete decision will be reached during this round of talks. the Korean company plans to import 10bcm per annum of Russian gas between 2015 and 2045. Kogas. Although the financial terms of the deals were withheld. An MoU on jointly constructing an LNG terminal on Russia’s Pacific coast was signed by Gazprom and Kogas in September 2009. it is unclear what route the gas interconnector could now take. said that South Korea and Russia were expected to begin a new round of talks in mid-April on a gas interconnector between the countries.6mn tpa) supply contract. the price of the oil supplied will be calibrated monthly. which will receive US$10bn.5%. one of the world’s largest gas buyers. © Business Monitor International Ltd Page 11 . quoted by Vedomosti. China In February 2009. Tsyganov also poured cold water on the subsea route plans. Following the launch of the Gazprom-led Sakhalin-II project in April 2009. Longer term. The agreement was made up of four deals. two unnamed Russian government sources unofficially provided details. which will receive US$15bn. Moscow and Beijing signed a major energy agreement that will see the Russian state oil sector receive US$25bn in Chinese loans in return for a commitment to sell China 15mn tpa of crude (300. based on the Platts and Argus trade quotes for the Kozmino terminal. However. following a marked deterioration in relations between the two Koreas in mid-2010. claiming that the shallowness and uneven surface of the seabed in the area makes the project highly challenging from a technical perspective. A high-level official quoted by Reuters reported that the interest rates of the loans will be pegged to LIBOR and will fluctuate between 5% and 5. we believe the pipeline will not be built until the political unification of the Korean peninsula. and the fourth is an agreement between CNPC and Transneft regarding the construction and exploitation of the China-bound branch of the East Siberia-Pacific Ocean (ESPO) pipeline. and oil pipeline monopoly Transneft. The third is a 20-year oil supply contract between China National Petroleum Corporation (CNPC) and Rosneft.000b/d) between 2011 and 2030. Rosneft and Transneft will spend the Chinese loans in two main areas: ESPO and 'corporate development'. In April 2010 Gazprom’s head of foreign projects. two pipeline options between Russia and South Korea are currently being evaluated: the overland pipeline via North Korea and the direct undersea pipeline. According to an official in the Russian energy ministry. Kogas began receiving Russian LNG under a 2. is now looking to boost these Russian gas imports significantly by expanding the regional LNG export capacity and/or ensuring the extension of the planned Sakhalin-Khabarovsk-Vladivostok gas pipeline into the Korean peninsula. The first two concern long-term loans to be provided by the China Development Bank to Rosneft. The first option suffers from severe geopolitical risks while the second option presents partners with formidable technological and financial challenges. According to Russian energy minister Sergei Shmatko.2bcm (1.Russia Oil and Gas Competitive Intelligence Report 2010 agreement signed by Kogas and Gazprom in September 2008. Stanislav Tsyganov. Additionally. which is likely to imply debt management.

which stated that the maritime border should be drawn equidistantly between the two countries. The dispute. The treaty includes provisions for cooperation in the development of hydrocarbons in the case of any new discoveries being made that straddle the demarcation line. which dates back to around 1970. As a former Soviet Union country. however.Russia Oil and Gas Competitive Intelligence Report 2010 Norway Russia and Norway have agreed to settle a dispute over their maritime border in the Barents Sea. and later Russia. 1982). signing a treaty in September 2010. the two sides discussed potential cooperation in LNG transactions and swap deals between LNG and pipeline gas in the European and Asia-Pacific markets. Qatar In a March 2010 press statement Gazprom said that Qatar had expressed interest in becoming involved in projects in the Yamal Peninsula at a working meeting between Gazprom's management committee and the Qatari Prime Minister Sheikh Hamad Bin Jassem Bin Jabor al-Thani. a figure far below the market rate. By cooperating over pricing the two countries could benefit as European gas demand recovers in the aftermath of the global economic downturn. which have taken advantage of the changing differential between LNG and pipeline gas prices to drive down the cost of energy imports. Qatar's discussion of gas cooperation with Russia will sound worrying to European gas consumers. The Soviet Union. as part of a more general policy of reducing energy subsidies to former Soviet satellites. Belarus Russia and Belarus have had several disputes over energy supplies and pricing since 1991 when the latter became independent. The resolution of the dispute will boost efforts to develop the oil and gas resources of the Barents Sea. In late 2006. had prevented the area from being fully opened up to oil and gas exploration. © Business Monitor International Ltd Page 12 . In addition Gazprom claimed that the Qatari delegation had expressed interest in projects in the Yamal Peninsula. was based on conflicting claims to an area of around 176.000sq km in the centre of the sea. in the early 2000s Belarus received gas at a price of around US$46/mcm from Russia. The disagreement between the two countries. prompting Belarus to introduce an oil transit fee that led to Russia temporarily cutting off its supplies. Norway based its claim on the 'median line' principle outlined in the UN Convention on the Territorial Sea and Contiguous Zones (1964) and the UN Convention on the Law of the Sea (UNCLOS. particularly in the possibility of commercialising the Tambeyskoe gas fields through the Yamal LNG project. countered that Russia's size relative to Norway dictated that it should receive a proportionally larger share of the sea and that it had claimed the area under dispute since 1926 using the meridian line rather than the median. Russia announced that it would increase gas prices. The two sides will also cooperate on determining the outer limit of the continental shelf in accordance with UNCLOS.000sq km of sea. which centred on 176. According to Gazprom.

The Imashev field is located on the border between Russia's Astrakhan Oblast and Kazakhstan's Atyrau Province near the Caspian Sea. This amount is set to increase. however.5bn.6mn bbl. and Gazprom estimates that at this rate Belarus's gas debt could reach US$500mn by the end of 2010. following a deal in January 2005 demarcating the Russia-Kazakhstan border.98/mcm in Q409 to US$169.7mn tonnes of gas condensate. In January 2005. Gazprom claims that Beltransgaz owes US$137. The price reportedly increased to US$119/mcm in 2008. and a MoU to © Business Monitor International Ltd Page 13 .22/mcm in Q110. The move follows a five-year period of near inactivity at the field. prices rose further from US$121. equivalent to 186. Russia's ITAR-TASS news agency reported that the field has estimated reserves of 128. Kazakh oil minister Sauat Mynbayev said that the field will be the first to be developed on the territory of the two states.5% of its state gas transit company Beltransgaz annually from 2008 to 2010 for a total payment of US$2. Following the Seventh Forum of Russia-Kazakhstan Inter-Regional Cooperation held in UstKamenogorsk on September 6-7 2010. Japan and Russia signed a raft of energy cooperation deals. In return for these subsidised rates. In response.7bcm of gas and 20. Others In May 2009. but it has not been developed owing to a dispute over the border with Russia. Kazakhstan Russia and Kazakhstan in September 2010 agreed to start jointly developing the Imashev gas and condensate field. In BMI’s view the current situation is unsustainable and is likely to lead to a renewed flare-up of the two countries’ long-running dispute unless Belarus agrees to pay the higher price demanded by Russia. which straddles the border of the two countries. One possible outcome is that Belarus will offer Russian companies an increased stake in its main energy infrastructure companies.Russia Oil and Gas Competitive Intelligence Report 2010 Under a deal to solve the crisis. Belarus agreed that Russia would increase gas export prices to US$100/mcm rather than the initially planned US$200/mcm. according to Kazakh news agency IRBIS. Belarus allowed Gazprom to purchase 12. in return for territory elsewhere and an agreement to develop the field jointly with Russia. the average 2009 price. the two countries announced that they have now agreed to survey the field's reserves and prepare it for development. Beltransgaz started paying for gas at the lower rate of US$150/mcm. the two countries signed a border demarcation agreement under which Kazakhstan ceded a border village covering part of the field to Russia. The deals include a joint oil exploration agreement. an accord that will see Russia supply enriched uranium to Japan. The field is Kazakhstan's second largest gas field after Karachaganak. During the winter period of peak demand. averaging US$150/mcm. Gas prices continued to rise in 2009. This progress on the field's development is a sign of Russia and Kazakhstan's willingness to cooperate on the development of shared resources. most likely in Beltransgaz and Belarus’s Mozyr refinery.49mn for gas imports in the peak period of Q110.

It was also agreed that Ukraine would not be fined for buying less gas in 2009. While the actual gas prices have not been released. It is unclear whether Tymoshenko’s comment means that the absolute price Ukraine will pay for gas imports in 2010 will remain more or less the same or whether the same 20%-discount principle will continue to apply. In 2009. Furthermore. Russia had agreed to increase the transit fees it pays Ukraine by 60% in 2010. head of ExxonMobil project development unit. the flow of gas was eventually restored on January 20. Between January and October 2009. and the dispute has encouraged the EU to accelerate its gas supply diversification programme. Putin and Tymoshenko agreed that in 2009 Ukraine would receive a 20% discount on European market prices in return for maintaining transit fees at the same rate as in 2008. In January 2009. according to Gazprom. While the likelihood of a new gas supply cut in the winter of 2009/10 is significantly lower. © Business Monitor International Ltd Page 14 . Gas Transit Ukraine As a result of pricing. Executives from US oil majors have accompanied US President Barack Obama on his state visit to Moscow in July 2009. Ukraine had agreed to buy a total of 42bcm. Bitter wrangling between Moscow and Kiev ensued while supply disruptions in Eastern and south-eastern Europe reached crisis point. payment and transit disagreements. almost exactly double the US$179. told Reuters during the trip that the company wanted Russia to make sweetening amendments to its subsoil law. down from the previously contracted 52bcm for that year. transit fees stood at US$1. Over 2009. causing a knock-on effect on European flows by January 7. Russia cut off gas supplies to Ukraine on January 1 2009. The price that Gazprom charged Ukraine in Q109 was US$360/mcm. Gazprom and Ukraine's state-owned Naftogaz in November 2009 agreed to reduce Ukraine's gas imports in 2010 to 33. After a number of false starts.70 per mcm per 100km. holding negotiations over expanding their presence in Russia.50/mcm Ukraine paid in 2008. Tymoshenko said that the gas price Ukraine pays 'will be almost the same in 2010 as it [was] in 2009'. with Ukraine to start paying European-level prices and for transit fees also to reach market levels as of January 1 2010.75bcm. Further details on the gas price and the transit fees Ukraine and Russia will pay respectively in 2010 have not been released.85bcm compared with the contracted 31. with additional deals likely to be signed in future. Tense negotiations between the two countries over gas-related debts and prices continued throughout 2009 before an uneasy truce between Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko was established in November of that year.Russia Oil and Gas Competitive Intelligence Report 2010 look at ways of transporting gas from Vladivostok to Japan. the reputations of both countries as a reliable energy supplier and a transit state respectively have taken a battering. Ukraine is said to have imported just 18. Neil Duffin.7bcm.

the transportation and export unit of state-run gas company Uzbekneftegaz. stating that it reduced the pipeline’s throughput by 80% after notifying Ashgabat that it could no longer take the normal volumes owing to the economic slump. with the remaining 50% owned by Raiffeisen Investment through its Swiss-registered Centragas Holding. Turkmenistan Relations between Ashgabat and Moscow have soured following a disagreement in April 2009 over an explosion on the pipeline that transports gas from Turkmenistan's Dauletabad field to Russia via Uzbekistan. Gas exports finally resumed in January 2010. in October 2008. but Turkmen President Kurbanguly Berdymukhamedov has demanded an international investigation and has said he will seek compensation from Gazprom. The deal was signed between Gazprom and Uztransgaz. thereby causing a rupture. The Turkmen government blamed Russia for unilaterally cutting the volume of deliveries through the pipeline without giving Turkmenistan due warning to relieve the extra pressure on the route. acting on behalf of a consortium of Ukrainian businessmen. Uzbekistan Gazprom signed a one-year supply contract with Uzbekistan in December 2009. announcing plans to raise exports to Iran. so whether Naftogaz and Gazprom will from now on trade directly remains to be seen. Poland Russian-Polish relations have often been fractious. which was signed in 2003. Gazprom said that it will be in line with conditions in the European gas market. Alexander Medvedev. and Naftogaz will be hoping that that company's elimination will help its own balance sheets. RosUkrEnergo. RosUkrEnergo.25bcm contracted in 2009. Gazprom clarified its stance on the incident in June 2009. Although neither side has announced the price formula. under the terms of a new agreement signed in late December 2009. is due to expire in 2012.50bcm from Uzbekistan in 2010. which provides for 30bcm of Turkmen gas to be exported to Russia in 2010 and annually to 2028. up from 11. Volumes have been cut drastically from the 70-80bcm of exports envisioned under the countries' previous gas supply agreement. is 50% owned by Gazprom. Moscow pinned the blame on technical problems on the Turkmen side. said that the two sides had agreed to start preparation for a long-term contract.Russia Oil and Gas Competitive Intelligence Report 2010 In January 2009 Putin and Tymoshenko also agreed to eliminate RosUkrEnergo. signed in 2002. In response to Russia’s cut in gas purchases. which was created in 2004 to replace EuralTransGas as the intermediary to manage the gas trade between Turkmenistan and Ukraine. Following the deal. was established as a middleman between Gazprom and Naftogaz in January 2006 following the gas pricing dispute. Turkmenistan has boosted its efforts to diversify its customer base. The current gas supply framework. and from the 50bcm that Turkmenistan exported to Russia in 2008. RosUkrEnergo has certainly profited from the Russia-Ukraine gas trade. although they have improved slightly since 2009 © Business Monitor International Ltd Page 15 . This had been agreed before. Under the new contract Gazprom will purchase 15. Gazprom's deputy chairman. launch a new gas pipeline to China and supply gas for the EU-backed Nabucco pipeline. A Swiss-registered monopoly JV.

A new gas supply deal between Polskie Górnictwo Naftowe i Gazownictwo (PGNiG) and Gazprom was ratified by the Polish government on February 10. On August 25 2010. the operator of the Polish section of the Yamal pipeline. According to local media. increasing its capacity from 1. with Gazprom and PGNiG holding 48% each. Lithuania's gas company Lietuvos Dujos views it as essential for its security of supply. Gazprom also built an underground gas storage facility at Kaliningrad. Putin claimed in September 2009 that under international agreements the company should be owned 50:50 by Gazprom and PiGNIG. Under the agreement. Lithuania is the largest gas consumer among the three Baltic states and like the rest of the region is wholly reliant on Gazprom for its gas supplies. the state-controlled Russian gas giant sent a letter to Lithuanian Prime Minister Andrius Kubillius.Russia Oil and Gas Competitive Intelligence Report 2010 under the more pragmatic new government of Donald Tusk. Gazprom argues the reform will wipe out its 34% stake in Dujos. threatening international court action if his government splits up Lietuvos Dujos into trading and distribution arms. In 2008 Lithuania received 3. Gazprom has agreed to increase gas supplies to 11bcm a year. setting the scene for a stand-off with Moscow. Lithuania has long complained that it is forced to pay some of the highest gas prices in Europe.1bcm of Russian gas in 2008. The deal's slow progress towards approval reflects disagreements between Poland and Russia over transit fees payable to EuRoPolgaz. Tensions between Gazprom and Estonia and Lithuania have been rising since the two countries announced plans in mid-2010 to break up their Gazprom-controlled gas monopolies in an attempt to loosen Russia's grip on their energy markets and comply with the EU's energy competition directive. The Baltic Region Gazprom in September 2009 began transporting gas along the second branch of the Minsk-VilniusKaunas-Kaliningrad pipeline. adding that Lithuanian government acted unilaterally without consulting the firm's shareholders. which runs to Germany. According to a report in Polish daily newspaper Rzeczpospolita. until 2045. Together with Estonia. The existing supply deal between the countries. which was completed in late-2009. Between 2006 and 2009 Gazprom unilaterally decided to pay lower transit fees than those set by the Polish energy market regulator URE. Kubillius told local media that the letter amounted to 'big company pressuring a small country'. Gazprom supplies Lithuania with gas under a long-term agreement effective through 2015. While the expansion of the pipeline is aimed at increasing gas supplies to the Russian enclave of Kaliningrad. has been extended from 2022 to 2037 and the two sides also agreed to extend an earlier deal for gas transit via the Yamal-Europe pipeline. the two sides have come to an agreement under which PGNiG will receive a discount on the price paid for gas deliveries in return for dropping its claim against Gazprom. known as the Yamal contract.5bcm.4bcm to 2. Gazprom will © Business Monitor International Ltd Page 16 . Prospects for an amicable solution have since been falling. He called for an investigation into the way that the Polish company Gas Trading had acquired a 4% stake in the project.

Speaking during an official visit to Turkey in June 2010 however. As an alternative to Gazprom's supplies Lithuania is pushing the Amber pipeline project. however. Its two neighbours. At a later stage. have become decisively uncomfortable in Gazprom's grip. Israel and Cyprus in a project known as Blue Stream II. Lebanon. Putin stressed that the decision was not connected to an attack by the Israeli navy on a © Business Monitor International Ltd Page 17 . Socar's CEO Rovnag Abdullayev said following the deal that Azerbaijan would export 1bcm of gas to Russia from January 2010.Russia Oil and Gas Competitive Intelligence Report 2010 charge Lithuania US$320/mcm over 2010. The same applies to even greater extent to Estonia. In January 2010 Gazprom announced plans to double gas imports from Azerbaijan to 2bcm from 2011. Latvia (34%) and Lithuania (34%). The more Russia-friendly Latvia appears to be content with the status quo for the time being. In its revised form the 5bcm pipeline will link the country with Poland's planned LNG terminal. The Middle East There has been much talk of extending Russia’s Blue Stream pipeline to Turkey further south into the Middle East. The exported gas will be sourced from the first phase of Azerbaijan's Shah Deniz field. bypassing the Baltics. brinksmanship with Gazprom could lead to some long cold Baltic nights. it needs a price premium to make supplying the region worthwhile. Gazprom added earlier in the month that it would be willing to buy 'all gas exported by Azerbaijan'. Putin said that gas discoveries in recent years in Israel have reduced the country's future gas import projections. Azerbaijan In March 2009 Gazprom and Azerbaijan's state-owned Socar signed an MoU for the delivery of a minimum of 500Mcm of Azeri gas to Russia a year starting in January 2010. Turkish energy ministry officials claimed that talks were under way between Gazprom and Turkish state-run gas distributor Botaş about extending the pipeline through Turkey to Syria. The Nord Stream subsea pipeline from Russia to Germany. A final binding agreement followed in October 2009. In February 2006. however. Prime Minister Putin said Israel is now likely to be excluded from the Blue Stream II project. has only raised Vilnius and Tallinn's energy security fears. Until the two countries develop tangible supply alternatives. For the foreseeable future. Gazprom argues that owing to the small absolute volumes consumed by the Baltic states. The Świnoujście terminal is due onstream in around 2015. Gazprom has managed to keep a presence in all the Baltic markets following the break-up of the Soviet Union and owns about a third of the national gas companies of Estonia (37%). with most FSS states paying significantly less. Gas from this project has also been earmarked for the EU-backed Nabucco pipeline project. Russia may also import gas from Shah Deniz's second phase. An average realised gas price paid by Gazprom's non-FSS European customers in H110 was just below US$300mcm. Lithuania's dependence on Russian gas looks solid. making an extension of the pipeline to Israel unnecessary. which is intended to supply Europe bypassing Russia.

Russia Oil and Gas Competitive Intelligence Report 2010 convoy heading towards Gaza. under which they would export duty-free crude oil to Belarus. Russia had said that it would provide tax-free oil to Belarus for domestic consumption. near Primorsk. with its refineries paying only around 36% of the standard Russian crude export tariff and then making a healthy profit exporting their refined products to European customers at market prices. and the government approved the project in May 2007. Russia imposed a limited export duty on crude oil exports to Belarus and insisted that Belarus increase excise tax on oil products. The estimated cost is RUB120-130bn (US$4. began selling oil directly to the owner of the country's two refineries. This led to Russian companies ceasing the 'give-and-take' contracts and companies that had participated. would now be reviewed.5mn b/d. This encouraged the companies to operate with so-called 'give-and-take' contracts. however. Oil Transit The Baltic Region Russian Prime Minister Vladimir Putin signed an order on December 1 2008 for the construction of a second trunk line of the Baltic Pipeline System (BPS). which drew international criticism. as part of a general process of phasing out energy subsidies to former satellite states. Oil should start flowing in Q312 at an initial rate of 600. Belarus had benefited from preferential oil trading terms with its eastern neighbour. In April 2007. Belarus Historically Russian companies were exempt from Russian export duties on oil exports to Belarus. The attack does appear to have had an impact on Turkey's view of the project. with a branch going to the Kirishi refinery. Construction was completed in 2001 and current capacity is 1. Belarus argued that this would go against an agreement on a customs union that the two countries signed late in 2009 and responded by demanding higher transit fees for oil crossing its territory. however. Belneftekhim.000b/d. BPS-2 will extend 1. The existing BPS transports oil from European Russia to Primorsk on the Gulf of Finland. where they would process it for a fee at the country's refineries before re-exporting it to Europe. with the country's Aksam newspaper citing unnamed energy ministry sources as saying that Turkey's international agreements with Israel.3-4. but that the country should pay export duties for oil exported to Europe. The new line will boost Russia's oil export capacity from the Baltic Sea and will provide an alternative export route to the Druzhba North pipeline that runs from Russia through Belarus and Poland into Germany. Under the expired agreement. such as Lukoil. Construction appears to have been delayed indefinitely from the June 2009 start-up date.300km from the Bryansk region to the port of Ust-Luga. Russia briefly stopped supplying Belarusian refineries in January 2010 after the existing supply deal expired without the two sides agreeing on a new framework. Transneft proposed building the new BPS trunkline (BPS-2) in January 2007. with capacity to be raised subsequently to 1mn b/d. including Blue Stream II.7bn). This divergence © Business Monitor International Ltd Page 18 . During earlier negotiations over the new oil deal.

Turkey The governments of Turkey.1 9.5mn b/d.Russia Oil and Gas Competitive Intelligence Report 2010 of positions was behind the two sides' failure to agree new terms. Russia and Italy in October 2009 signed a preliminary agreement for the construction of the Samsun-Ceyhan oil pipeline.197 957 519 335 1.3 0. No start-up dates have been released.1 3. Table: Key Upstream Players Company Lukoil Surgutneftegaz Gazprom Neft*** Tatneft Gazprom TNK-BP Rosneft Russneft Total Oil/liquids production (000b/d) 1.8 462 12 12.4 5.1 na 0.1 78. Under one proposal. by Anadolu Pipeline Company (TAPCO).3 14. at least two proposals are being considered to achieve this. Volumes beyond the quota would have to be exported by pipeline.4 14. In an effort to fill the TAP pipeline.830 1. however.2 2.3 1. which is developing the project.5 12. Transneft was offered a 50% stake in the pipeline in December 2009. Oil products and petrochemicals would be unaffected by both proposals and would still be transported through the Bosphorus. which committed Belarus to paying full export duties on re-exported Russian oil. which would cross Turkey from the Black to the Mediterranean coast and thereby provide Russia with another export route for its Black Sea oil terminals. companies intending to export oil from the Black Sea would be given a quota restricting the volumes that can be transported through the Bosphorus.1 na nm © Business Monitor International Ltd Page 19 . According to remarks made by Transneft's president. Nikolai Tokarev. are due to disappear after the new customs union between the two counties comes into force in mid-2010. forcing companies to transport all oil volumes by pipeline.02 Market share (%) 1. which will eventually rise to 1. The 550km oil pipeline will have an initial capacity of 1mn b/d. Oil flows resumed after a precarious temporary agreement was reached in late January 2010. a 50:50 JV between Eni and local company Çalik Energy. Under the other proposal.3 0. All duties. earlier in 2009. crude oil exports through the Bosphorus would be halted completely.9 2.5 2.180 254 11 Market share (%) 19.7 21.3 0.1 Gas production (bcm) 7. Russia agreed to supply the pipeline. also known as the Trans Anadolu Pipeline (TAP).680 2. Tokarev did not specify how the quotas would be imposed. Transneft said in June 2010 that it could support proposals to impose quotas on shipments of oil through the Bosphorus.4* na 0.

Company data 2009 © Business Monitor International Ltd Page 20 . Key Downstream Players Company Lukoil Rosneft Surgutneftegaz Gazprom Neft Tatneft TNK-BP Bashneft affiliates Refining capacity (000b/d) 894 1.695 305 1. na = not available/applicable. na = not available/applicable.5 60 106 42e Market share (%) 0.3 20.1 9 Retail outlets 2.4 Gas production (bcm) na 32 2 na Market share (%) na 5.400* 317 Market share (%) 19e 15 3 na 5 na na *Including Ukraine.562 484 1. . Source: BMI.1 1 na Includes JV entitlements.130 398 964 80 560 500e Market share (%) 16. 2008 company data.5 1.5 7 17.Russia Oil and Gas Competitive Intelligence Report 2010 Table: Key Upstream Players Company Imperial Novatek Shell Alliance Oil/liquids production (000b/d) 13. Source: BMI. ***includes all Gazprom Group companies.170 1.5 1 0. e = estimate.5 10.1 0. e = estimate.

0bn (2007) RUB613. earnings will benefit and more cash will be available for supply and export expansion.000b/d (2008) 226. with Russia keen to consolidate the gas major’s position. revenues and earnings.3bn (2006) RUB311. strengthen its grip on aspects of the energy market and liberalise domestic and CIS pricing.0trn (2009) RUB3.8bn (2009) RUB742.000b/d (2007) Condensate production: 220.42trn (2007) RUB2.9bn (2008) RUB658.38trn (2005) Net income RUB793. Gazprom Neft) SWOT Analysis Strengths: Dominant share of upstream gas supply Control of gas transportation system Rising export demand for gas Huge exploration upside potential Scope for domestic merger Gas production: 462. It also intends to increase its direct ownership.000b/d (2007) Weaknesses: Cost and efficiency disadvantages Rising investment requirement Artificially low domestic gas prices Opportunities: Growth in domestic/CEE/EU gas demand Large areas of unexplored territory Incorporation of Sibneft assets and management Efficiency gains/price liberalisation Threats: Russian corporate governance Changes in national energy policy © Business Monitor International Ltd Page 21 .Russia Oil and Gas Competitive Intelligence Report 2010 Company Profiles Gazprom Company Analysis The threat of a break-up appears to have passed. The addition of Sibneft has accelerated the growth of Gazprom and established it as the leading Russian generator of hydrocarbons volumes.6bcm (2007) Crude production: 645. With higher domestic selling prices.15trn (2006) RUB1.600b/d (2008) 680. Financial Statistics Revenues RUB3.0bcm (2009) 550.52trn (2008) RUB2.0bcm (2008) 548.1bn (2005) Operating Statistics (inc.

said that from mid-May 2010 the company had begun to see a much sharper seasonal drop in demand than it had expected. With US demand for gas imports on the wane. Strategy By 2030. Having scuppered Gazprom's North American ambitions. accounting for half of its production by 2020. down roughly 10bcm on Miller's forecasts.5bcm. This was the worst performance in Gazprom's history. By early 2010 Gazprom’s executives had acknowledged the need for a strategic overhaul owing to the negative impact of rising domestic US gas production. and in phases 2 and 3 of Iran’s giant South Pars project. Domestic prices. however. which supplies fuel to almost every Russian region. up from around US$20/mcm in early 2000s. Shtokman). In December 2005. reaching new markets with LNG and underwater pipelines. however. the CIS states and over 25 European nations. Speaking at a news conference on June 9. are gradually being liberalised and are set to reach around US$70/mcm in 2010 and US$90/mcm in 2011. as it is forced to supply gas to the domestic market at subsidised rates. then deputy chairman Medvedev announced Gazprom's aim 'to gain more than 10% of the US market by 2010. Gazprom wants to become a global energy player. In 2009.6bcm in 2011 and to 542. At present Sakhalin-II is the only operational liquefaction terminal. with the current low of 512bcm registered in 2001. however. these targets are now looking decidedly unrealistic. This led CEO Alexei Miller to announce a more ambitious target of 529bcm for 2010. Gazprom's gas and condensate departmental head. The company also has a virtual monopoly control over the domestic gas pipeline network. The company now expects to produce 519. It wants to add 90mn tonnes of LNG capacity by 2030. He said that the company expects this to increase to 528. In April 2010 he told Russian media that by 2013 the company expected to produce 565.4bcm in 2012. is beginning to pose a threat to its core business closer to home. Cherepanov said that the company has now revised its gas production forecasts.3bcm in 2010. the spreading 'shale revolution'. Notable foreign assets include minority stakes in China’s West-East gas pipeline. The first negative consequences are already being felt by the company. Chayandinskoye) and the Far East (Sakhalin) to fuel future growth. domestic demand began to recover. according to preliminary government figures. Gazprom also planned to supply about 25% of the world’s LNG needs by 2030. which would be a 13-year production high.Russia Oil and Gas Competitive Intelligence Report 2010 Market Position Gazprom accounts for 80% of Russia’s gas production (2009) and holds at least two-thirds of the nation’s gas reserves (or 15% of world reserves). increasing to 20% [at a later date]'. Gazprom’s production fell to 460bcm. but that target was scrapped following the decline of the US import demand. as LNG cargoes head for European ports having been turned away from the US. Vsevolod Cherepanov. © Business Monitor International Ltd Page 22 . In Q110. With output at its mature Western Siberia fields in decline. Gazprom expects new generation projects in the Arctic (Yamal. There is. East Siberia (Kovykta. pushing up Gazprom's production figures. The firm remains heavily reliant on overseas gas sales.

most of Gazprom’s current export capability is geared towards Western Europe. the competitiveness of Russian gas imports in the region will be seriously. must be a concern for the company. but this relationship is in the very early stages. Bolstered by the successful application of technological advances in hydraulic fracturing (fraccing) in the US and Canada. The economic downturn. the oil majors are now eyeing European shale plays. the Eurasian giant is busy courting the Asian market. In a setback for its resource nationalism agenda. In fact.7trn (US$56bn) in mid-2009. In 2007 the company directly supplied France with only 500Mcm. and the cost of this network should ensure full usage through the long term. undermined. The Russia-Ukraine gas dispute is also likely to have hit its bottom line by around US$1-1. The firm’s reported interest in UK gas supplier Centrica indicates a determination to gain greater control over its Western European customers. a more fundamental threat in the making to Gazprom's position in the European gas market. Gazprom’s debt burden has led the company to express its readiness to reduce its stake in major projects. despite the assured political opposition to such a deal. Gazprom is intensifying its relations with Western Europe. The bilateral ties are certainly getting closer. Although no firm project timetable has been set.5bn. The Yamal peninsula is believed to contain around 2. In February 2009. has forced the company to postpone investment in expensive new projects. which will allow the Russian company to sell gas directly to the Italian market. Should the European shale basins prove to be commercial. Gazprom has previously said that it plans to sell up to 3bcm of gas to Italy per annum from 2010. Russian business daily Kommersant reported that in an attempt to cut costs.Russia Oil and Gas Competitive Intelligence Report 2010 however. The news follows the 2006 agreement between Eni and Gazprom to extend supply contracts to 2035. including Nord Stream and Shtokman. Gazprom is aiming to start producing the first 15bcm of gas in Yamal by Q312 (a year later than originally expected) and then gradually boost volumes to 250bcm per year. however. Regardless of the rhetoric. Gazprom may invest exclusively in projects that would be profitable at a Brent price below US$25/bbl. The plan was swiftly denied by the company. January 2008 saw Gazprom announce plans to control 10% of the French gas market by 2012/13. in return for increased funding from foreign partners. and perhaps terminally. Gazprom’s high debt levels. The company confirmed in November 2007 that it is discussing long-term gas supply deals with several Italian utilities. which stood at some RUB1. Despite denying the report.4tcm of gas. including Enel and Edison. with an exchange rate of US$1/RUB36. Meanwhile. moving into such unlikely gas producing destinations as Poland and Sweden. Gazprom is committed to future European energy supplies through pre-existing contracts and infrastructure. as well as damaging EU confidence in Russian gas supplies. which stressed that no concrete strategic decisions have been made. In March 2008. True. Gazprom announced that it may swap Russian upstream properties for some of Enel’s power assets. Kommersant reported that planned investments had previously been based on US$50/bbl.14bn bbl of oil plus 10. © Business Monitor International Ltd Page 23 .

averaged US$207/mcm in the same period. In 2010 Gazprom has been facing pressures to reduce its European prices. To some extent the injection of an extra RUB103bn of investment in 2010 reverses Gazprom's belt-tightening in 2009. Should E. Citing an unnamed Gazprom source. In H110. While realising that the company will have to overcome regulatory barriers to enter the US market. the company's board approved an amended version of the 2010 budget. In E. In February 2010 E. Extra investment in long-term projects such as South Stream and Algerian exploration also indicates Gazprom's broad strategic ambitions of defending its position in European gas markets. Fresh demands for discounts are a highly unwelcome development for Gazprom. only six months after receiving its first discount. it has said that it will use its economic strength to acquire assets. With imported gas volumes remaining below levels agreed with Russia.ON was among five major European utilities that obtained a price concession on a take-or-pay long-term supply contract with Gazprom. In September 2010.Russia Oil and Gas Competitive Intelligence Report 2010 with major French utilities EDF and GDF Suez close to getting a minority stake in the South Stream and North Stream pipelines respectively.ON's case. Projects that were put on ice in the economic downturn are now gradually being defrosted. Latest Developments Corporate Gazprom has boosted its 2010 capex despite a downward revenue target revision. Gazprom says it sold gas to Europe on long-term contracts for around US$300/mcm. Over 2009 European companies have been talking with Gazprom to reduce the volumes of gas that they are committed to buying under long-term 'take-or-pay' contracts. has reportedly asked for a fresh price cut in August 2010. followed by Turkey's state-owned © Business Monitor International Ltd Page 24 . and to a lesser extent the Netherlands. Russian daily Kommersant stated that the first company due to pay according to the 'take-or-pay' contracts is Eni on January 18 2010. Prices at UK's National Balancing Point (NBP). In Germany in particular. E. as has recently been arranged between Russia and Ukraine. One of Gazprom's largest customers. European buyers are seeking to avoid penalties set out in the contracts by agreeing a reduction in gas purchases.ON Ruhrgas of Germany. In November 2007. Gazprom announced plans to operate a natural gas entity in the US by 2014. Europe's largest spot hub. falling to as low as US$150/mcm in early 2010. which has been hoping for a steady European economic recovery to revive its flagging fortunes in its main market. Gazprom has been losing market share to Norway. In November 2009 Gazprom cut its 2009 capex by RUB216.ON succeed in gaining a concession.5bn (US$x). the German utility gained a right to buy 16% of its Russian gas imports through to 2012 at spot prices. other European utilities are set to follow suit. raising planned investment by 13% to RUB905bn (US$29bn).

although it is significantly above 20% of Gazprom Neft’s valuation at the time that the deal went through (US$2. Gazprom sold to Germany’s E.ON’s direct 3. In November 2009. The decision highlights Gazprom's attempts to take advantage of a highly active domestic bond market to restructure its long-term debt obligations. According to a joint statement. As part of the agreement.2bn on Russia's bond market. The agreed US$4. are still in progress for unspecified reasons.ON. which itself holds an almost 3% stake in Gazprom. other companies affected are Germany's BASF and RWE. and France's GDF Suez and Total. Gazprom now owns 100% of Gerosgaz.ON Ruhrgas a 25% stake in Severneftegazprom. however. In December 2009. the new MoU will not only see the two companies work together in E&P but also design and development of technologies for the harsh Arctic environment. By July 2009 Gazprom was set to acquire a controlling stake in Kyrgyzstan's national gas company Kyrgyzgaz. Gazprom and Kogas signed a gas and chemical deal worth US$102bn in September 2008. (at the time of the deal 60:40 owned by Eni and Enel) acquired equity in Gazprom Neft and a 100% stake in Western Siberiafocused gas companies ArcticGaz and Urengoil in April 2007 for RUB151. Gazprom received from E. Gazprom has apparently proposed buying a 75% plus one share in Kyrgyzgaz. replacing a 2005 cooperation agreement signed with Statoil and Norsk Hydro prior to their merger.ON a 49% stake in Russia's Gerosgaz. plus interest.54bn (US$5. At the time. Gazprom announced the country's largest ever debt issuance on April 7 2010. The negotiations.5% share in Gazprom has not been affected by the deal. Gazprom instructed its banking arm. following Bishkek’s approval of an agreement allowing Gazprom to participate in the company’s privatisation. The economics of the deal are perplexing. According to Kommersant. Gazprom secured an option to buy a majority stake in the gas assets and the shares in Gazprom Neft before April 9 2009 for around US$4bn. As part of the deal. the deal seemed in Gazprom's favour as it was believed to undervalue Gazprom Neft. In June 2009. the companies deepened ties by signing another MoU on joint gas trade in the US. Under the deal Gazprom will pay US$4.2bn purchasing price is equal to the price paid by Eni.2bn for the stake. Gazprombank and Moscow-based Renaissance Bank to run the bond issue programme. SeverEnergia. a Gazprom subsidiary and licence holder of the Yuzhno-Russkoye gas field in West Siberia. E. Gazprom and Statoil signed a three-year MoU on E&P in northern Russia and Norway. in an attempt to raise US$10.2bn). highlighting the deal’s marked political undertones. In return.83bn) during a controversial liquidation auction of Yukos assets. which will comprise 13 issuances over a five-year period. Russia will supply South Korea with 10bcm of gas per year over a 30-year period from 2015. In April 2009 Gazprom exercised its right to purchase a 20% stake in oil producer Gazprom Neft from Eni. © Business Monitor International Ltd Page 25 .Russia Oil and Gas Competitive Intelligence Report 2010 Botaş and German company E.

Gazprom in October 2009 announced plans to bring forward the start of production at the Kirinskiy field in the Sakhalin-III project. leaving Eni and Enel with 29. It aims to launch the Samburskoye field by June 2011. raising questions over the future of the giant Shtokman development in northern European Russia. Projects Gazprom launched test production from Russia's first coal bed methane (CBM) project in February 2010. An FID is due in March 2010. The news agency. One option being looked at is a swap agreement. gas would be transported via pipeline to Europe. the field was awarded to Gazprom. is estimated to hold 75. with output expected to reach 150. Tas-Uriahskoe. The field. Gazprom is re-evaluating its global expansion strategy in the light of falling US gas import demand. it would mark a significant step forward in Gazprom's North American expansion plans. lowering the share of coal in the regional energy mix.6% respectively. Following the announcement by Gazprom in February 2010 that first gas from the Shtokman project has been pushed back by three years to 2016. At the end of 2007. Coboloh-Nedzhelinskoe and Verhneviluchanskoe – because projected output at its Chayandinskoe Block alone would allegedly be insufficient to justify constructing a connector to the Sakhalin-Khabarovsk-Vladivostok pipeline.000boe/d by 2013. thereby connecting Yakutia to the expanding gas pipeline network on the Pacific coast. The gas will supply the industrial belt of western Siberia.4% and 19.Russia Oil and Gas Competitive Intelligence Report 2010 Gazprom moved to finalise the acquisition of majority stakes in ArcticGaz and Urengoil in September 2009. discovered in 1992. is now scheduled to start in late-2011 or early 2012. The Kirinskiy field. proven and probable reserves at the four © Business Monitor International Ltd Page 26 . potentially to fill the Sakhalin-Vladivostok pipeline. as previously envisioned. The CBM production facility at the Taldinskoye coal field in the Kuzbass region of south-western Siberia is expected to produce up to 5bcm of gas per annum once fully online in 2011-2012. through which Conoco could be granted access to the Yuzhno-Tambeisky gas deposits in Yamal in return for Gazprom's joining projects in Alaska. citing documents from the consortium. and exploration drilling started in July. which was initially expected to come onstream in 2014. Statoil (24%) and Total (25%). Gazprom farmed in a 51% into SeverEnergia for US$1.6bn. Russian news agency Prime-Tass has reported that the project’s consortium may be considering sending all of the field's gas by pipeline to European markets rather than exporting half as LNG. The Shtokman Development Company (SDC) comprises Gazprom (51%). The unexpected growth of unconventional gas production in North America has torpedoed Gazprom's ambitious plans for exports to the world's largest gas consumer. Eni claims the consortium’s licences hold an estimated 5bn boe of reserves. Should a deal of this kind go ahead. reported that if the company fails to reach an investment decision on developing LNG at the project by the December 2011 deadline. Gazprom petitioned the government in August 2009 to award it four new Yakutian permits – Srednetuginskoye.4bcm of gas and 64mn bbl of condensate. In June 2009. Gazprom said in November 2008 that it was considering US majors Exxon and Conoco as potential partners in its Yamal LNG development.

24tcm. which have combined reserves of 6. that Kovykta has become the latest major gas development to be shelved by Gazprom as a result of the recession. the company would be likely to alter contract terms to allow exports outside Irkutsk. It now appears. the same year it plans to finish the construction of the YakutiaKhabarovsk interconnector. Gazprom would prefer to concentrate on cheaper and lower-risk projects. According to Vedomosti’s report in July 2009. however. and more than sufficient for the planned pipeline to the Pacific. CEO Miller stated that the high helium content of the block's gas would require the construction of an expensive processing plant. Nominally. © Business Monitor International Ltd Page 27 . the impact of the recession on Gazprom's finances has already forced the company to freeze several high-profile projects in the east and north of the country. building the required downstream infrastructure to channel Kovykta’s gas to local end-users.000km pipeline has a design capacity of 32-35bcm per annum and aimed at eventually enabling exports of Yakutia’s gas from coastal LNG terminals. The 6. This was based on the assumption that the Irkutsk authorities would comply with their part of the contract. let alone the four new Yakutia blocks it has asked for. It was thought that once Gazprom took the reins. Moreover. with the eventual aim of constructing a gas pipeline to China. The newspaper’s government sources claim Putin overall supported Gazprom's suggestions. to threaten to withdraw the Kovykta licence. the majority stakeholder in the project remains TNK-BP. In the current circumstances. In 2004 Gazprom estimated Chayandinskoe’s reserves at 1. over half of Yakutia’s total.Russia Oil and Gas Competitive Intelligence Report 2010 new blocks stood at 462.29trn of gas and 8bn bbl of condensate. wholly state-owned Rosneftegaz may replace Gazprom in the ownership talks for the giant Kovykta field in the eastern Irkutsk region.6bcm of gas (based on Russia’s A. The concessions are therefore likely to be idled for years to come. Gazprom asked the government for tax holidays and/or export duty exemptions for its eastern projects. In pushing for the sale. The MoU on TNK-BP’s sale of its interest in the Kovykta operating vehicle. B and C1 classification). According to Vedomosti. adding that they were 'indifferent' towards Kovykta. Apart from its petition for four new Yakutia blocks. Gazprom would find it difficult to fund the development of Chayandinskoe. the Kremlin focused on TNK-BP's failure to raise gas output at the project to the 9bcm required by the terms of the contract. using somewhat perverse logic. TNK-BP's inability to raise production led the Russian subsoil agency. Whether Gazprom has the need or the capacity to develop the new Yakutia permits is in question. Irkutsk has failed to do this: the utilised gas output at the field is by early 2009 was an annualised 30Mcm. but as a result of pressure from the energy ministry. Rusia Petroleum. Although Gazprom did not disclose its output projections for Chayandinskoe. Officials at the company told Kommersant that given the current demand conditions. Gazprom planned to bring the block onstream in 2016. Gazprom paid around RUB11bn for the blocks. By mid-2009 Gazprom had already been awarded 14 blocks in eastern Russia without a competitive tender. to Gazprom was signed in June 2007. for the past two years the Anglo-Russian company has been negotiating the sale of its stake to Gazprom.

Gazprom announced in September 2008 plans to invest RUB23. In BMI's view. Sakhalin-I and -II. While Russia may previously have held the upper hand in negotiations. suggesting the project will remain frozen for years to come. Gazprom announced in June 2009 that it was indefinitely delaying the construction of a gas pipeline to China after the two countries failed to come to a gas price agreement. with Exxon wanting to export the gas directly at (higher) international prices and the Kremlin wanting Gazprom to buy all of Sakhalin's I gas at (lower) domestic prices. Gazprom is also considering building an LNG export terminal and a petrochemical facility near Vladivostok. has never participated in any active operations. Russia and China have been in negotiations over gas exports since 2006. © Business Monitor International Ltd Page 28 .830km pipeline is due onstream in Q311. While it will be designed to supply the domestic market. being frozen. Initially. chaired by the Vice-Prime Minister Igor Sechin. The planned transfer of its interests to a holding company implies that even this date could be optimistic.Russia Oil and Gas Competitive Intelligence Report 2010 Previously. but their inability to resolve the differences resulted in the ambitious pipeline project.6bn). Sakhalin-I's gas supplies will be used to feed local demand. according to media reports. Rosneftegaz. in the longer term it may also be used to connect remote gas reserves to the country’s export infrastructure. The 1. even if Gazprom divests Kovykta at this stage.5bn in constructing a new gas pipeline in the Far East. The pipeline will connect the Sobolevskoe deposit with the capital of the Kamchatka region. Kommersant's sources stated that no final decision had been made. Although Gazprom confirmed talks with Rosneftegaz on the Kovykta transfer.000b/d of condensate. In May 2009. thanks to its vast gas reserves and China's rapidly rising demand. The pipeline will link two major projects offshore Sakhalin Island that are currently onstream. Gazprom and its German partner Wintershall have brought onstream the Achimgaz project in July 2008. Turkmenistan and Myanmar. Beijing is now benefiting from major new gas import deals with Kazakhstan. its monopoly on Russia's gas export means it will re-enter the project when the economics of the projects are deemed to be sufficiently favourable. and is due onstream in 2010. In the same month Gazprom announced that it was set to buy 20% of gas produced from the Exxon-operated Sakhalin-I. Gazprom intended to begin large-scale development at Kovykta by 2017. to the mainland. The section to Khabarovsk is already operational. which was to transport some 30bcm of gas from 2011 and up to 85bcm at a later stage. Petropavlovsk-Kamchatsky. Gazprom boosted the annual budget for the Sakhalin-Vladivostok pipeline to RUB50bn (US$1. 50:50 Achimgaz JV in Yamal is to produce nearly 1bcm of gas per annum and 6. The project’s lifespan is 40 years. The US$1bn. Tensions between Exxon and the Kremlin have been high owing to a disagreement over marketing rights for gas from the project.

Now re-christened Gazprom Neft. Financial Statistics Revenues: US$24. Gazprom’s attempts to become a major oil player paid off in 2005 with the acquisition of Sibneft. made an eventual link with another player inevitable.700b/d (2007) 657.000b/d (2006) Refining throughput 670. Sibneft was due to have merged with Yukos to form one of the world’s leading oil producers.66bn (2008) US$4. equity entitlement) 957.18bn (2006) Net income: US$2.77bn (2009) US$4.08bn (2008) US$21.Russia Oil and Gas Competitive Intelligence Report 2010 Gazprom Neft (formerly Sibneft) Company Analysis Already the dominant force in the Russian energy sector.17bn (2009) US$33. The collapse of the deal during the Yukos crisis.14bn (2007) US$3.000b/d (2009) 932.700b/d (2009) SWOT Analysis Strengths: Significant role in Russian oil supply Cost-effective producing assets Substantial domestic refining business Strong retail portfolio State support Weaknesses: Lack of foreign partners Rising investment requirement Some cost and efficiency disadvantages Opportunities: International expansion Focus on under-explored Russian regions Cost cutting/asset upgrading potential Threats: Sustainability of Russian oil growth Oversupply in CEE refining capacity Competition with Rosneft © Business Monitor International Ltd Page 29 . Gazprom’s move denied Western companies the chance to acquire a well managed.66bn (2006) Operating Statistics Net oil production (inc.000b/d (2008) 868. however.77bn (2007) US$20. profitable business – but has given the gas giant a major opportunity to develop oil expertise.

Following two failed merger attempts with Yukos in September 2005. owing to its strong position in high-potential regions.Russia Oil and Gas Competitive Intelligence Report 2010 Market Position Gazprom Neft was founded as Sibneft in 1995 and took on a broad portfolio of former state assets.000b/d. jointly owned with TNK-BP and Rosneft respectively. Sibir’s net output averaged around 80.7% after exercising its buy-out right in April 2009. and is particularly interested in buying more European assets after in February 2009 acquiring 51% of Serbia’s Naftna Industrija Srbije (NIS). as well as Irkutsk and Chukotka further east. Sibir's upstream operations are focused on Khanty-Mansiysk where it holds the Salym fields. Through its wholly owned unit Moscow Oil and Gas Company (MOGC). Gazprom Neft also works on the Northern Zadegan project in Iran. As of Q309 Gazrpom Neft also has managerial control of Sibir Energy. Omsk. operated on a 50:50 basis with Shell. It will achieve this goal by purchasing refineries at home and abroad. Khanty-Mansiysk. The company was then renamed Gazprom Neft. which operates about 30 fields in the Yamal-Nenets and Khanty-Mansiysk autonomous regions and holds around 60% of the company’s reserves. and the Yuzhnoe and Orekhovskoe fields. Other major producing assets include stakes in Slavneft and Tomskneft. Gazprom Neft’s upstream assets are chiefly located in the Northwest and Western Siberia (Yamal-Nenets.000b/d Moscow Oil Refinery. The company is involved in the planned 1mn b/d Burgas-Alexandroupolis pipeline. which will transport Russian crude to Europe and is preliminarily scheduled for completion in 2010. although Sibir’s acquisition has given it a strong position in Moscow. the company plans to raise refining capacity until it accounts for two-thirds of crude production. It is now the fifth largest crude producer in Russia and has one of the best growth rates. Downstream. Sibir owns 100% of 69 MKT-branded service stations. buying out businessman Roman Abramovich’s stake in a US$13bn deal. Tomsk.8mn b/d by 2020 through developing Arctic fields and investing US$70bn. operated by subsidiary Magma Oil (95%). Gazprom Neft expects to receive the licence to develop the Arctic Prirazlomnoye deposit by 2010 and plans to start work at the giant offshore field five years later. Strategy Gazprom Neft plans to produce 1.000b/d Omsk Refinery and a 60% vote in the 240. as well as a growing network of service stations primarily located in Western Siberia. which it won after significant effort. In 2009. Gazprom acquired 72% in Sibneft. Tiumen). 51% of Mosnefteproduct's 64 stations and storage terminals and 25% of BP's Moscow retail network. © Business Monitor International Ltd Page 30 . The main production arm is Noyabrskneftegaz. Gazprom Neft’s refining and market assets include the 385. raising its stake to 95.

Gazprom plans to hand over the field. which is expected to be completed by late-2010 or early-2011. CEO Alexander Dyukov has also made an offer to Chevron to develop more fields in western Siberia. Prirazlomnoye. Gazprom Neft consolidated Sibir into its financial accounts and manages the company in partnership with the Moscow city council (19. remains unclear. Boris Zilbermints. said in December 2008 that the company may be looking for foreign partners to develop the Prirazlomnoye oil field in the Barents Sea. which in mid-2009 indicated its intention to raise its Sibir stake.3% of Sibir’s shares are unaccounted for). Novoportovskoye and Orenburgskoye East fields hold around 1. Since having trumped a rival bid from TNK-BP in late April 2009. Northern Taiga Neftegaz. spending a combined US$1. © Business Monitor International Ltd Page 31 . The ownership of the other 50% of Bennfield (and therefore 23. which holds estimated oil reserves of 600mn bbl. In December 2008. particularly the Moscow council. Whether it was able to come to an agreement with the remaining shareholders.3% of Sibir) remains disputed by its owners. In late September 2009. Gazprom Neft has bought out Sibir’s floating shares and some of its major investors. Gazprom is currently constructing an offshore production platform at Prirazlomnoye.Russia Oil and Gas Competitive Intelligence Report 2010 Latest Developments Gazprom Neft was awarded rights to develop the Novoportovskoye and Orenburgskoye East oil fields from parent Gazprom in December 2009.35% of Sibir's shares. STS has three licences in the Tomsk region with combined oil and condensate reserves of 189mn bbl (C1+C2). Gazprom Neft acquired indirect ownership of 23. Gazprom Neft and Chevron formed a JV in 2007. Gazprom Neft gained majority ownership of mid-sized domestic producer Sibir Energy in June 2009 after acquiring 50% of investment company Bennfield. along with a number of other licences. The outstanding Bennfield shares are currently held as collateral by state-owned Sberbank. to Gazprom Neft in 2009/10. adding that it expects an answer soon. The deal has yet to be approved by Malka’s shareholders.7% (following a series of opaque deals with various previous shareholders. Gazprom’s subsidiary Sevmorneftegaz previously reneged on its intentions to bring in foreign participants and stated plans to develop the field on its own. 2.7bn and 700mn bbl of oil reserves respectively.3%). Having bought the assets of Bennfield's joint owner Igor Kesaev. bringing its total stake in the AIM-listed firm to at least 54. Gazprom Neft’s deputy director.500b/d. pending payment of its outstanding debts.67bn on the deals. Gazprom Neft signed a deal to acquire Sweden-based Malka Oil’s subsidiary STSService for US$118mn. to explore for and develop assets in the Yamal-Nenets region. is expected to produce 120. Gazprom Neft petitioned the Russian competition authorities to acquire 100% of Sibir. In December 2009.

Russia Oil and Gas Competitive Intelligence Report 2010

Rosneft
Company Analysis
Rosneft’s Yukos acquisitions turned the company into Russia’s largest oil producer, surpassing private rival Lukoil, and extending state control to some 40% of Russian production. In addition, the company has also become Russia’s largest refiner. Rosneft is largely state-owned, although a 2006 IPO has introduced an element of privatisation that the recession-hit Russian government in late-2009 pledged to deepen. Gazprom and Rosneft in November 2006 agreed a strategic cooperation deal that should see them share major development opportunities, rather than fighting over them. Financial Statistics Revenues: US$46.83 (2009) US$68.99bn (2008) US$49.22bn (2007) US$33.1bn (2006) Net income: US$6.51(2009) US$11.1bn (2008) US$6.5bn (2007) US$3.5bn (2006) Operating Statistics Oil production: 2.18mn b/d (2009) 2.13mn b/d (2008) 2.0mn b/d (2007) 1.5mn b/d (2006) Gas production: 12.7bcm (2009) 12.4bcm (2008) 15.7bcm (2007) 13.6bcm (2006) Proven reserves (PRMS): 22.9bn boe (2009) 22.3bn boe (2008) 21.7bn boe (2007) 11.8bn boe (2006)

SWOT Analysis
Strengths:
Largest domestic oil producer Strong relationship with government Large fuels retail network Portfolio of CEE downstream interests Weaknesses: Complex corporate structure Inherited high cost base and inefficiency

Opportunities:

Growth in Russian oil production Rise in CEE regional oil consumption Expansion into Chinese downstream market Long-term gas export opportunities

Threats:

Sustainability of Russian oil growth Oversupply in CEE refining capacity Changes in national energy policy

Market Position
Rosneft’s 19 E&P subsidies cover most of the Russian regions, but around 80% of its production comes from Western Siberia (Yuganskneftegaz and Purneftegaz) and the Volga region (Samaraneftegaz). Rosneft owns and operates seven major refineries in Russia: the Tuapse refinery on the Black Sea coast; the Komsomolsk refinery in the Russian Far; the Kuibyshev, Novokuibyshevsk, and Syzran refineries in

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the Volga-Urals region; and the Achinsk and Angarsk refineries in East Siberia. The company is also planning to construct a new 240,000b/d facility in Primorsk in Leningrad Region with Surgutneftegaz. Rosneft also runs export terminals in Arkhangelsk, Tuapse, Nakhodka and De-Kastri, and operates a retail network of around 600 service stations.

Strategy
Over the next two decades, Rosneft aims to become Russia’s leading energy company both in output and financial terms. To achieve this it is pursuing several policies. The company plans to increase crude production by exploiting existing oil reserves, with the goal of reaching 2.8mn b/d by 2015 and 3.4mn b/d by 2020. Rosneft also aims to exploit upside potential in gas. Rosneft believes itself to be capable of producing 40bcm by 2012, but the volumes will depend on gas sales and access to UGSS capacity, regarding which Rosneft is currently negotiating with Gazprom. The company is also developing value chains linking upstream assets directly to export markets and refining facilities. Ownership or a significant equity share in marketing subsidiaries will allow Rosneft to maximise netbacks. Under the 2010 business plan, Rosneft is planning capex of RUB217bn, equivalent to US$7.23bn using the RUB30/US$ exchange rate applied by Rosneft. The figure is the same as the investment originally envisioned for 2009. In February 2009, however, capex for that year was subsequently boosted to RUB227.85bn. Of the 2010 capex target, US$2bn will go on the refining segment, a 150% rise y-o-y. In June 2007, Rosneft then CEO Sergei Bogdanchikov announced plans to expand the company's refining capacity ninefold by 2015. Rosneft is planning to boost output in 2010 by 4.5% to 2.36mn b/d on the back of new start-ups in East Siberia. In June 2007, Bogdanchikov said the company plans to issue bonds to reduce debt and expand refining capacity ninefold. He further said that the company may build new oil refineries abroad, potentially in China and in other East Asian countries, to meet its refining capacity target by 2015.

Latest Developments
A company press statement on September 6 2010 said First Vice-President Khudainatov has been appointed President of Rosneft with immediate effect. Khudainatov's previous roles have included a spell at the Executive Office of the Russian president, as well as the position of general director of Severneftegaz. He replaced Bogdanchikov, who had been in charge since 1998. According to an FT report on September 4, Bogdanchikov is believed to have been at odds with company chairman and Deputy Prime Minister Igor Sechin. An unnamed FT source said that Khudainatov was less likely to adopt positions that conflicted with those of Sechin. Khudainatov's managerial background at Severneftegaz, a Gazprom subsidiary, has prompted speculation that Rosneft is looking to increase its exposure to Russia's gas industry.

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Rosneft has made a significant discovery in the Irkutsk region in Eastern Siberia, according to a statement by the Russian energy ministry in January 2009. The discovery holds 1.2bn bbl of oil (C1+C2). The discovery was made at the Sevastyanovo field in the Mogdynskiy Block, which Rosneft acquired in 2006 for RUB1.32bn (US$44mn). No further details have been released, and Rosneft has not yet commented on the discovery. Sinopec and Rosneft are considering building a 400,000b/d refinery in the Far Eastern Primorsky Krai region, the Chinese company’s chairman, Su Shulin, said in October 2009. Rosneft plans to begin exploration offshore the disputed region of Abkhazia in 2010 after a five-year E&P deal with the regional authorities was signed in May 2009. Under the agreement, two companies will be set up, one to manage upstream offshore operations and another to focus on the downstream, where Rosneft plans to build service stations and to supply gasoline, diesel and lubricants. The latter company will be a JV with the Abkhazia state company Abkhaztop. In April 2009, the Moscow Arbitration Court ruled in favour of a claim lodged by Rosneft’s Samaraneftegaz subsidiary against independent rival Russneft over the latter's purchase of a former Yukos asset. Russneft was ordered to pay Rosneft RUB5bn (US$148mn) or cede its 50% stake in the Zapadno-Malobalykskoye (ZMB) production unit. According to the claimant, under the Yukos bankruptcy ruling, ZMB owed it RUB5bn in debt arrears. The court, however, stopped short of satisfying Samaraneftegaz’s petition in full and annulling Russneft’s ZMB purchase, thus transferring its stake to Rosneft. The fact that Samaraneftegaz initiated the legal proceedings nearly three years after Yukos's liquidation suggests that control over ZMB rather than the fine is the main motivation for the claim. Rosneft and its partner Korea National Oil Corporation (KNOC) signed a preliminary deal for Kamchatka exploration in December 2008. The two companies had been exploring the area until the federal sub-soil agency Rosnedra decided not to grant a new licence when the original licence expired in August 2008. While Rosnedra failed to give an official reason for not extending the licence, it is believed that the decision was based on delays in the exploration schedule. It remains unclear whether Rosnedra has decided to grant a new licence to the partners or whether Rosneft and KNOC have come to the agreement before applying for a new licence. Under the original contract, Rosneft held 60% in the West Kamchatka Holding, whose wholly owned subsidiary Kamchatneftegaz was the operator of the project. A South Korean consortium comprising KNOC, GS Caltex, SK Energy, Daewoo International, Kumho Petrochemical and Hyundai held the remaining 40%. When considering Kamchatka’s hydrocarbon reserves, Rosneft's and KNOC’s keenness to explore and develop the area is obvious. According to Rosneft's website, West Kamchatka contains 'prospective resources' of some 13.3bn bbl of oil and 2tcm of gas. This makes it comparable in scale with Sakhalin and highly attractive to Gazprom, which reportedly also applied for the Kamchatka licence in October 2008.

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A partial privatisation of Rosneft was completed in July 2006, with a US$10.6bn listing of the shares in London and Moscow.

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Lukoil
Company Analysis
Lukoil is the leading private Russian oil company and should remain so – particularly now that ConocoPhillips is on board as a strategic investor and upstream partner. Domestic volume growth is beginning to slow, but new projects, such as the Yuzhnoye Khylchuyu field in the Timan-Pechora region and fields in Uzbekistan and Iraq, provide growth potential. The downstream portfolio is also benefiting from international investment, putting Lukoil into a position of secure medium- and long-term revenue and earnings expansion. Operating Statistics Net domestic oil production (inc. equity shares): 1.84mn b/d (2009) 1.93mn b/d (2008) 1.95mn b/d (2007) Net domestic sale gas production: 6.3bcm (2009) 8.7bcm (2008) 8.2bcm (2007) Refining throughput (group total): 893,000,000b/d (2009) 894,000b/d (2008) 976,000b/d (2007) Proven oil and gas reserves: 17.5boe (2009) 19.3bn boe (2008) Financial Statistics Revenues US$81.5bn (2009) US$107.7bn (2008) US$82.2bn (2007) US$68.1bn (2006) US$56.2nn (2005) Net income US$7.0bn (2009) US$9.1bn (2008) US$9.5bn (2007) US$7.5bn (2006) US$6.4bn (2005)

SWOT Analysis
Strengths:
Leading role in Russian oil supply Rising share of Caspian production Substantial domestic downstream business Strong portfolio of CEE downstream interests Conoco strategic partnership

Weaknesses:

Slower domestic growth than other producers Rising investment requirement Cost and efficiency disadvantages

Opportunities:

Growth in Russia/Caspian oil production Rise in CEE regional oil consumption Cost cutting/asset upgrading potential Massive Iraq development

Threats:

Sustainability of Russian oil growth Oversupply in CEE refining capacity Changes in national energy policy

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20% less than the target in the previous 10-year plan (2007-2016). while boasting 1. Romania and Bulgaria. the company has refining assets in the Netherlands. Ukraine. ConocoPhillips bid for a minority Lukoil stake in 2004. Saudi Arabia and Colombia as well a contract for the second phase of the giant West Qurna oil field in Iraq. The bulk of the company’s E&P assets are located in West Siberia.5bn.3% of world oil reserves and 2. with smaller reserves in European Russia. significantly below the 4mn b/d previously envisioned for end-2016. with output expected to peak at 150. The new plan raises the upstream capex earmarked for new generation projects from 39% to 57%. had been in competition for the top spot with Yukos prior to the latter’s liquidation. The gas segment has also lost its shine for Lukoil. Lukoil. the company is increasingly pessimistic over output prospects from its maturing fields. © Business Monitor International Ltd Page 37 . Lukoil now expects oil production to reach only 2. Lukoil now accounts for 18% of Russian oil production and 18. Consequently.9bn from US$1. Lukoil and Conoco also created the 70:30 Naryanmarneftegaz JV to develop the Yuzhno-Khylchuyu field in the northern Nenets region. The new plan sees the share of gas in total production rising from 10% in 2009 to 26% by 2019. 60% of its retail network and 4% of the resource base.7mn b/d by the end of the coming decade. while investment in West Siberia and Volga/Urals will fall by 30% in comparison with the old scenario. Capex on E&P will total US$60bn. Consequently. Lukoil’s relationship with Conoco appeared to be weakening in March 2010 when the US company informed Lukoil of its plans to sell half its 20% stake in the Russian producer as part of a US$10bn divestment programme. subsequently raising its interest in the company to 20% at a combined cost of US$7.2bn envisioned under the previous 10-year plan (2007-2016).000boe/d. Nenets (Timan-Pechora) and the North Caspian regions. Uzbekistan. International operations account for over 30% of Lukoil’s total refining capacity. The company will reduce annual capex to US$0. Production began in mid-2008. Lukoil will postpone gas developments in the Caspian and Yamal. Furthermore. Internationally. previously seen as some of its main growth regions. until it better understands the impending 'revolutionary changes' in the oil and gas industry. Egypt.1% of global production. Fedun believes the impending 'acute glut' of global gas supply will exert strong downward pressure on prices and will hurt the profitability of its non-associated projects. and retail networks in the US and most Eastern European and CIS states.Russia Oil and Gas Competitive Intelligence Report 2010 Market Position Russia’s largest private crude producer. against 33% previously envisioned for 2016. Lukoil holds stakes in E&P projects in Azerbaijan. Kazakhstan. Strategy Lukoil has curtailed its growth ambitions for the 2010s under its new 2010-2019 strategic development plan that was outlined in December 2009. The biggest change in the 2010-2019 plan is a major reduction in upstream spending and output targets.3% of refining throughput. said Vice-President Leonid Fedun. Italy.

touted as one of Russia's new oil and gas frontiers. announcing plans to produce 200. Lukoil has also significantly reduced its planned expansion.6bn. This is significantly below Lukoil’s © Business Monitor International Ltd Page 38 . Lukoil reported revenues of US$23. and the remaining 60% will be sold on the open market by end-2011. Yuri Korchagin is one of the six large fields discovered by Lukoil in the Russian sector of the Caspian Sea since entering the area in 1995.45mn b/d of refining throughput by 2019. The company hopes to achieve 1.6% back to the company for US$3. In April 2010 Lukoil brought the first oil field in the Russian sector of the Caspian Sea onstream with the launch of production from the Yuriy Korchagin deposit. In December 2009. The new emphasis on caution and shareholder returns mirrors that of its partner Conoco and goes against the generally resurgent mood of the oil industry. Lukoil was planning to launch the Yuri Korchagin field in Russia’s sector of the Caspian Sea in early 2010. In September 2009 Lukoil provided an update for its North Caspian project. but the new downstream budget certainly leaves little scope for large purchases. The new plan suggests Lukoil may curb its foreign downstream asset buying spree. Lukoil will use the freed-up funds to concentrate on improving profitability and cash flow and raising dividends.9% on the previous year. Latest Developments US major Conoco decided to sell its entire 20% stake in Lukoil in mid-2010. Having reduced its capex. power generation and petrochemical divisions will amount to US$25bn.000b/d of oil and 6bcm of gas per annum by 2016. and a 5% stake in the giant Tengiz field in Kazakhstan. Rumours have been circulating that Lukoil may be interested in more European refining assets that the French major is considering selling. Lukoil boasts 100% exploratory drilling success in the Caspian. a trunkline running from western Kazakhstan to Russian ports. The deal gives Lukoil a 12.Russia Oil and Gas Competitive Intelligence Report 2010 In the downstream segment. Capex on refining. with 78% of that figure earmarked for domestic projects. The company's growth strategy for retail networks in Turkey and Eastern Europe may also be affected. The company sold to sell 7. much less than the 2mn b/d envisioned under the previous plan.5% stake in the Caspian Pipeline Consortium (CPC). culminating in the payment of US$725mn for a 45% stake in a Dutch refinery from Total in September 2009.75bn in Q109. Revenues increased from US$14. To date.05bn in Q110.4bn in Q310. Korchagin is one of Lukoil's six large discoveries in the Caspian. which saw the company acquire more than US$4bn of refining and fuel retailing assets in 2007-2009.9bn and net income of US$2. The investment will be channelled into upgrades and efficiency measures rather than capacity expansion. while profits were up 126. making it one of the high-growth potential regions for the company.000b/d of oil and 1bcm of gas at its peak. Lukoil gained full control of the LukArco vehicle after buying out its partner BP for US$1. The field holds 570mn boe of possible (P3) reserves and is expected to produce 50.

fell through in late 2008 after the Spanish government appeared to implicitly blocked the deal as a result of popular opposition. The companies did not comment on the size of the stake and the terms of the deal. PKN’s trumping of Russian bids for a controlling stake in Mažeikių in 2006 coincided with Transneft’s decision to shut down the refinery's feedstock pipeline owing to apparent technical problems. which put the North Caspian target at 260.6bn) of Caspian investment. The April 2009 announcement called for RUB390bn (US$16. 25%). Bourgas (Bulgaria) and Ploieşti (Romania). is due onstream in 2014. state-run KazMunaiGaz (KMG. a state-run Russian financial institution acquired a stake in Lukoil. The North Caspian fields are located relatively close to Lukoil’s refineries including plants at Odessa (Ukraine). In June 2009. Gas output from Korchagin and Filanov will be pumped to the Russian region of Kalmykiya and then onwards to Gazprom’s trunklines.Russia Oil and Gas Competitive Intelligence Report 2010 previous announcement made in April 2009. the larger Filanov (Filanovskoe). After Korchagin. and French companies Total (17%) and GDF Suez (8%). the second field. One of the company's most high-profile foreign deals. but unnamed sources have told Reuters that the stake is less than 5%. Polish media reported in April 2009. © Business Monitor International Ltd Page 39 . the purchase of a 10% stake in Spanish-Argentine company Repsol YPF. Lukoil and Transneft have allegedly approached Polish refiner PKN Orlen over buying a stake in Lithuania's Mažeikių refinery. Development of the mostly gas-bearing Khvalynskoe deposit on the Kazakh maritime border is carried out under a PSA held by the Caspian Oil and Gas Company consortium comprising Lukoil (50%).000b/d and 14bcm by 2016. Khvalynskoe is expected to peak at 8bcm and is preliminarily due onstream in 2016.

While it will take years to become a leading Russian oil company.1bn boe (2008) 8.3bn (2008) US$5. Long-term gas interests capable of supplying the Asian markets provide another dimension. signalling a new chapter in the company’s history.5bn (2006) US$30.000b/d (2009) 675.7bn (2005) Operating Statistics Oil production (inc.68mn b/d (2009) 1.3bn (2007) US$6.6bn (2006) US$4. on the company staying in the Kremlin’s good books.Russia Oil and Gas Competitive Intelligence Report 2010 TNK-BP Company Analysis Following an acrimonious battle for control over TNKBP during H108.6bn (2007) US$35. JVs): 1. however. All of these opportunities depend.9nn (2008) US$38.000b/d (2008) 778. Financial Statistics Revenues: US$34.000b/d (2007) Proven oil and gas reserves (PRMS) 11.97bn (2009) US$5.3bn boe (2007) SWOT Analysis Strengths: Major oil producer Significant share of refining capacity Large fuels retail network Portfolio of CEE downstream interests Benefits of BP management/technology Weaknesses: Complex corporate structure Inherited high cost base and inefficiencies Opportunities: Growth in Russian oil production Rise in CEE regional oil consumption Cost cutting/asset upgrading potential Long-term gas export opportunities Threats: Sustainability of Russian oil growth Oversupply in CEE refining capacity Changes in national energy policy © Business Monitor International Ltd Page 40 .6bcm (2008) 9. BP and its Russian partners in September 2008 restructured the board and top management.45mn b/d (2008) 1.0bn (2005) Net income: US$4.75bn (2009) US$51. TNK-BP has the potential to challenge Russian oil industry leaders over the medium term. it should rapidly become the most profitable given BP’s commitment.4bcm (2007) Refining throughput (Russia): 574.67bn boe (2009) 8.42mn b/d (2007) Gas production: 12bcm (2009) 11.

Of these.000b/d.5bcm in the Nizhnevartovsk region in 2008. agreed to a US$6. The two smaller refineries are the Krasnoleninsk and Nizhnevartovsk plants in West Siberia. the Lisichansk plant in Ukraine can produce Euro-4 level diesel and the Saratov refinery in southern Russia can produce Euro-3 and Euro-4 gasoline. which produced 6. In November 2009. Pavel Skitovich and Barsky. the owners of TNK. Its downstream assets include interests in five refineries.4bn to include AAR’s 50% interest in Slavneft in the new JV. will be an interim CEO until 2011. with representatives nominated equally by BP and AAR and decisions taken unanimously. has had the technology to produce Euro-5 diesel since 2008. albeit of a less dramatic nature. who previously led independent West Siberian Resources. many thorny issues remain. in a head-to-head competition for the post. was named the winner.7bn (96%) is to be spent on the two upstream projects. Nonetheless. with an installed capacity of 50mn tpa and a retail network of 1. UK-based oil major BP and Russian financial companies Alfa Group and AccessRenova (AAR). while the Ryazan refinery. The planned upstream spending is in line with TNK-BP's strategy of aggressively replacing its reserves each year. In September 2008. TNK-BP’s upstream assets are chiefly located in the West Siberia and Volga-Urals. Third. BP later agreed to pay a further US$1. The main gas producer is the Rospan wholly owned subsidiary. BP and AAR reportedly pitted their respective nominees. signalling a breakthrough in a complex and acrimonious power struggle.Russia Oil and Gas Competitive Intelligence Report 2010 Market Position In February 2003. Alfa director Mikhail Fridman. it provides for a restructuring of the company’s board. Following Dudley’s resignation in December 2008.35bn merger of their Russian businesses. around US$1. TNK-BP has four refineries in Russia and one in Ukraine. however. The second proviso was the replacement of CEO Robert Dudley with an ‘independent’ candidate Maxim Barsky. Strategy TNK-BP approved a US$1.8bn investment plan for 2010-2012 in February 2010. in Central Russia. and we expect further ructions. ahead.600 sites in Russia and Ukraine. including the introduction of three new directors unconnected to either side. with a total nameplate capacity of 560. The first involves the full field development and the establishment of regional infrastructure at the eastern part of the Uvat group of oil © Business Monitor International Ltd Page 41 . At the time the deal represented the single largest Western investment in post-Soviet Russia. it allows the sale of up to 20% of a subsidiary of TNK-BP through an IPO on the international markets. Barsky. AAR nominates the chairman and BP the CEO. while Barsky is being trained. TNK-BP is governed by a 10-member board. First. Of the total. who was approved by the board. The agreement has three main components. BP and AAR signed an MoU setting out a resolution to their six-month dispute over control of TNK-BP.

TNK-BP announced plans to increase production by 18% to 1. In March 2009. with the focus on its core East Siberian and West Siberian regions. Of this amount.3bn package outlined in October 2009 to enhance fuel quality from the company's refineries. Rusia's total debt stood at RUB11. according to the company in November 2007. Although the company did not state the preferred buyer for Russia’s assets.mn b/d by 2012.Russia Oil and Gas Competitive Intelligence Report 2010 fields. TNK-BP will be hoping that the investment in its upstream Siberian assets will help contribute towards its goal of replacing 100% of its production with new reserves each year. The announcement of the new spending follows a statement by TNK-BP in October 2009 that it was planning to invest US$400mn in its fields in the Yamal Peninsula. The conclusion of long-term contracts with customers of TNK-BP requires guarantees of gas transportation by Gazprom. while the second project is the further development of the Verkhnechonskoe oil field in East Siberia. Petersburg. The move is in response to Russian legislation increasing the minimum lifespan of roads. There have also been talks with Gazprom over the joint construction of a now-scrapped LNG project near St. the operator of the Kovykta field. according to company's financial report. Latest Developments TNK-BP in July 2010 was in talks with unnamed banks over taking a US$700mn unsecured three-year loan. TNK-BP’s growing gas output is obliging the group to negotiate with pipeline monopoly Gazprom over the offtake of the extra volumes. as part of a US$1.9.000b/d Saratov refinery. In February 2008.4bn (US$367mn). TNK-BP announced that it had begun voluntary bankruptcy proceedings for its subsidiary Rusia Petroleum. TNK-BP initiated bankruptcy proceedings against Rusia after recalling its loans to the subsidiary in mid-May 2010. using US$15bn of projects to deliver a recovery in volume expansion. By end-Q110. US$180mn was allocated for developing its heavy oil Russkoe field in 2010/2011 and the remaining US$220mn was put towards its Suzun and Tagul oil fields. On June 3 2010. it is most likely that the Kovykta licence will find its way to government-connected firms. US$137mn has been earmarked to upgrade a diesel hydrotreater unit at the company's 130. In May 2010 the company said that it is planning to expand its premium-class bitumen production by 60% y-o-y. © Business Monitor International Ltd Page 42 . according to Reuters. The company aims to spend around 80% of its total budget each year on upstream projects. TNK-BP has started signing long-term (three-year) contracts for the supply of gas to customers.000b/d). TNK-BP said it would invest US$1bn by 2012 into development of the Samotlor field for maintaining oil production in it at a level of 30mn tpa (600.

000b/d. In June 2007.000 tonnes in 2009 to 36. The Russkoye field. Nemchinovskoe. Discovered in 1968. In the past Rosnedra has argued for the removal of the licence from TNK-BP thanks to the company's inability to raise production to 9bcm as required under the terms of the licence.000 tonnes in 2010. Protozanovskoe. Russia's environmental watchdog Rosprirodnadzor has advised Rosnedra. Yuzhno-Venikhyartskoe and Zapadno-Epasskoe fields. Discoveries in 2007/08 included the Kosukhinskoe. with the company planning to incorporate its assets in the neighbouring Omsk and Khanty-Mansiysk regions into the project. total investment in Uvat was set to reach RUB13bn. The company expects to reach peak output of approximately 220. Russia's subsoil agency.25bn bbl of oil reserves (international P3 classification). Uvat is set to become a cornerstone of TNK-BP's Western Siberian strategy. while the other half will come from smaller satellite fields that are yet to be developed. with TNK-BP being pressured to sell its 62. could extend the life of a road to seven-10 years from the current two to three years. located in Russia's Yamal-Nenets region. the field remained undeveloped owing to the challenging climate and the lack of heavy oil processing technology.000b/d in 2009 and above 100. Talks over the sale broke down. However. TNK-BP claimed that using TNK Alfabit. the operator of Kovykta. To contribute to the 60% growth target. Sredne-Keumskoe. Peak production is expected to be between 200. to Gazprom. In early February 2009. which will be produced at its pilot plant in Ryazan. TNKBP aims for a 50% increase in production of its polymer-modified TNK Alfabit brand of premium bitumen from 24. Kalchinsoe. According to TNK-BP's figures cited by Oil & Capital. The Ust-Tegusskoe and Urnenskoe fields will account for half of that figure. 250km south-east of Moscow. an MoU was signed under which TNK-BP agreed to sell its interest in Rusia.61mn bbl of recoverable reserves (C1+C2) in its 13 licences in the area. There are currently 21 known fields in the Uvat project. depending on whether TNK-BP constructs facilities for blending the oil to allow it to be transported by pipeline.47-1. its subsidiaries Tyumenneftegaz and TNK-Uvat brought onstream the Ust-Tegusskoe and Urnenskoe fields.Russia Oil and Gas Competitive Intelligence Report 2010 which will boost demand for longer-life bitumen products. TNK-BP entered the Uvat district in the early 1990s and has since discovered an estimated 1. the first of which. Secero-Kachkarskoe.000b/d and 400. © Business Monitor International Ltd Page 43 . and since July 2009 Gazprom seems to have put its interest in the field on the backburner as a result of the recession. entered production in 1993.8% stake to a stateowned company. holds an estimated 2. this output target was based on the assumption that the Irkutsk authorities would comply with their part of the contract through building the required downstream infrastructure to channel Kovykta's gas to end-users. A dispute over the field's development has been ongoing for years. however.000b/d in 2010. TNK-BP is ramping up volumes at the Uvat project in the Tyumen region of West Siberia.Malyk.000b/d in 2015/16. to withdraw the licence for the Kovykta gas condensate field from TNK-BP.5bn. TNK-BP estimates the total cost of developing the field at US$4. By end-2009. A. output from the two new fields was expected to average 60.

one of the company’s Russian co-owners. TNK-BP in August 2009 announced plans to construct a new 450Mcm gas processing plant at the Pokrovskoe oil field in the Orenburg region by 2012.8% in Kovykta through its stake in Rusia Petroleum. with capex of US$500mn planned for 2009.000b/d by 2015. Currently. Capturing 95% of associated gas production is nominally a legal requirement in Russia. a JV between TNK-BP (68%) and Rosneft (32%).Russia Oil and Gas Competitive Intelligence Report 2010 With Irkutsk having failed to fulfil its side of the contract. whose other shareholders are Interros Resources (26%) and the Irkutsk government (11%). TNK-BP holds 62. TNP-BP invested over US$600mn in Kamennoye and hopes to boost its output to 80. VerkhnechonskNefteGas. Kommersant’s industry sources put the price tag at US$150-400mn.000b/d of crude from fields in Western Siberia. © Business Monitor International Ltd Page 44 . TNK-BP already reached a deal with Gazprom to link the plant to its pipeline system. In mid-October 2008. Crude is exported to Asia via the ESPO pipeline. Although cost estimates for the Pokrovskoe facility have not been announced. TNK-BP had already invested over US$600mn in gas utilisation projects and the company plans to invest a further US$700mn in such projects by 2012 with the view of raising the utilisation from the current rate of roughly 80% to 95%. TNK-BP has not been unable to meet the contracted output targets.000b/d.600-200. which is expected to average 26. announced in June 2009 that the sale of Kovykta could be imminent and the government was close to including Kovykta in Gazprom’s investment programme.900b/d. It is estimated that around 80% of TNK-BP’s gas production in 2009 will be a by-product of oil production. Kovykta's reserves are estimated at 2tcm (C1+C2). TNK-BP said it had invested around US$1bn in the field to date and is likely to spend another US$4bn over the course of its producing life. Viktor Vekselberg. TNK-BP announced the start of new phase of production at the Kamennoye oil field in West Siberia. TNK and Sibneft jointly acquired Slavneft in 2004’s privatisation auction. boosting its output to 36. Pokrovskoe is operated by TNK-BP’s subsidiary Orenburgneft. began commercial oil production at the Verkhnechonsk field in East Siberia. By end-2008. In June 2009.100b/d over 2009. with the company producing over 360. TNK-BP believes Verkhnechonsk to hold recoverable reserves of over 1bn bbl of oil and sees peak production at 140. In 2004-2008. Russian police raided TNK-BP headquarters on March 2008 as part of a long-running criminal investigation against Sidanko Oil (one of the companies merged to form TNK-BP in 2003).

41bn (2008) RUB43.Russia Oil and Gas Competitive Intelligence Report 2010 Tatneft Company Analysis Tatneft is struggling to deliver upstream volumes.3bn (2007) RUB318.3bn (2006) SWOT Analysis Strengths: Dominant oil producer in Tatarstan Growing CEE portfolio Domestic refining and marketing interests Involvement in petrochemicals supply Weaknesses: Rising investment requirement Modest refining/retail capacity Limited upside potential in oil supply Opportunities: Growth in local oil/regional demand Expansion of petrochemicals segment Downstream oil upgrading/expansion Threats: Sustainability of upstream oil volumes Oversupply in CEE refining capacity Changes in national energy policy © Business Monitor International Ltd Page 45 .3bn (2008) RUB356.25bn bbl (2008) 5. Attempts to diversify internationally have met with mixed success.8bcm (2007) Financial Statistics Revenues: RUB220bn (2009) RUB444.100b/d (2009) 501. expand petrochemicals capacity and enlarge/improve its downstream arm. Net income/(loss): (RUB100bn) (2009. State priorities do not necessarily coincide with those of the company.8bn (2006) Operating Statistics Crude production: 519. and Tatneft looks unlikely to be able to compete effectively with its larger Russian peers.000b/d (2007) Gas production 756Mcm (2009) 760Mcm (2008) Proven oil reserves: 6.311 bbl (2009) 6.) RUB8.3bn (2007) RUB29. Investment is required at high levels in order to maintain output.500b/d (2008) 517.91bn bbl (2007) Proven gas reserves 36. prelim. with modest exposure in Ukraine and a stalled deal in Turkey. and has a small and inefficient downstream operation.

The three-year loan. in which Tatneft holds a 50% stake. The loan will be used for general corporate purposes particularly for Tatneft's refinery and petrochemical complex. Strategy Tatneft said in January 2004 that planned expansion projects through to 2010 would cost over US$2. Tatneft will also expand its service station network and the capacity of the Nizhnekamsk synthetic motor oil plant.000b/d UkrTatNaft. Tatneft holds an 8. which is currently being built at Nizhnekamsk in Tatarstan.6% stake in Ukraine’s largest refinery. as it is already investing billions to maintain production levels at its ageing fields. Tatneft increased its syndicated loan to US$1. and a network of over 600 service stations in Russia and Ukraine. incorporating a polypropylene and polyethylene production plant.5bn from US$900mn. Kalmneftegaz. The company’s crude output is expected to remain flat over the next five years. which is secured on oil exports. the 20. the TAIF group of companies (6%) and employees (8%). This will include a US$1. Latest Developments In November 2009.3bn processing complex at the Nizhnekamsk refinery.7bn. The group’s key shareholders are the regional government of Tatarstan (with 31%). was oversubscribed.000b/d Kichuyi plant (100%) and the Nizhnekamsk plant (63%). Downstream assets include two Tatarstan refineries.Russia Oil and Gas Competitive Intelligence Report 2010 Market Position Tatneft is the main oil company active in the Volga region of Tatarstan and the country’s sixth largest oil producer. © Business Monitor International Ltd Page 46 . the 370. The company also has exploration acreage in Libya and Syria. In May 2009. has booked 35bcm of gas reserves from a discovery in northern Kalmykia.

The combined investment in the project is put at US$900mn.9bn (2008) EUR12. The 29-year PSA was signed in 1995 and came into operation in 1999.Russia Oil and Gas Competitive Intelligence Report 2010 Total Company Analysis The French major’s focus in Russia is the European Arctic.000b/d (2009) 8.6bn (2009) EUR13.2bn (2007) EUR11. Current output is around 20. Total’s most significant upstream asset is its 40% stake in the Kharyaga field. The company has also been named partner of the Shtokman development field. The other partners in the project are Statoil (30%). Downstream. but following the development of Phase 3.0bn (2008) EUR158. Total operates petrol stations across the country’s main cities. © Business Monitor International Ltd Page 47 . which is controlled by the regional government. The French company is keen. Zarubezhneft (20%) and the Nenets Oil Company (10%). production at Kharyaga is expected to rise to around 60.4bn (2006) EUR11. Financial Statistics (Group) Total revenue: EUR131.000b/d by 2013.7mn (2007) EUR132.6bn (2005) Operating Statistics Net oil production: 11.000b/d (2007) 7.000b/d. The company has a 50% interest in the Kharyaga oil field.7bn (2006) EUR117. to increase its stake in Russia’s upstream despite the challenging business environment.3bn (2009) EUR180. but it may not gain ownership of Shtokman’s reserves or production. In the downstream segment. as are most IOCs.000b/d (2008) 7.2bn bbl of oil.1bn (2005) Net income: EUR8.000b/d (2006) Net gas production: 204Mcm (2009) SWOT Analysis Strengths: Offshore and deepwater expertise Good relationship with Gazprom Weaknesses: Rising investment requirement Unpopularity of PSAs Opportunities: Rise in CEE regional oil and gas consumption Potential for award of further Russian acreage Threats: Sustainability of Russian oil growth Changes in national energy policy Uncertainties over financing and future operations of Shtokman Market Position Total’s interest in Russia is concentrated in the Arctic region of Yamal-Nenets. which holds estimated reserves of 1. Total has some petrol outlets across the country.

Total was given Shtokman stake. The company seems to be benefiting from France’s admission of Gazprom into the national downstream market. will be held by Gazprom’s 100%-owned Sevmorneftegaz unit. Latest Developments In June 2009 Putin approved a JV between Total and independent gas producer Novatek. The licence for the field.7mn in development of the Kharyaga field during 2009. It is speculated that in return for greater access to the French market. which holds the Termokarstovoye licence. ending previous disputes over the project’s spending. In June 2009. The operating consortium will take on all the risks and will own the infrastructure for 25 years once production has started. The company has relevant expertise in deepwater and long-distance gas production. Russian authorities approved an increase in the 2007 cost estimate for Kharyaga oil field. which provides for state control over resources and production with minority stakes for foreign partners. Cost overruns on PSAs have been a major sticking point between IOCs and Russian regulators. the company will invest US$4-5bn in the project over the next five years. with Gazprom retaining all output marketing rights. Christophe de Margerie. while Gazprom’s statement suggests that this is not the case. In March 2007. Total will take a 49% stake in Terneftegaz. Putin approved Novatek and Total's US$900mn plan to develop the 47. a Novatek subsidiary. Putin's good relations with de Margerie are likely to give Total the reassurance it needs to increase investment in Russia. in spite of the new paradigm for foreign investment in the country. as well as in LNG transportation. the company gained a 25% stake in the Shtokman field in the Barents Sea. © Business Monitor International Ltd Page 48 . Under the deal. Putin’s blessing followed Total’s sale of its stake in its Dutch refinery to Lukoil. According to Total’s CEO. however. as saying that Total and Gazprom are looking at more joint projects in Russia. This has prompted concern that Total’s share in the field could go the way of Shell’s Sakhalin-II stake and TNK-BP’s interest in Kovykta. the energy ministry accused Total of failing to comply with the terms of Kharyaga’s licensing agreement. Strategy The French company has been one of the few foreign majors to maintain investment in the country. Les Echos newspaper cited Total’s head of E&P. in July 2007. with the company’s CEO claiming that it will do so. and be sold to Gazprom. as PSAs only oblige operators to share their profits with the state once their expenses are recouped. The partners will carry out further appraisal and development studies with the aim of launching the project in 2011. Yves-Louis Darricarrere. The Russian government in April 2009 approved Total’s plans to invest US$403.3bcm Termokarstovoye field in Yamal-Nenets. However. which holds gas reserves of around 3.Russia Oil and Gas Competitive Intelligence Report 2010 In July 2007. Following a meeting with Total's CEO.2tcm. There has been some confusion over whether Total will be allowed to book a 25% share of the field’s reserves. and even intimated that the French group could be chosen for the second phase of the Shtokman field project.

however. and then giving Total a major role in the field’s development. Gazprom performed a sudden volte-face and declared that it would develop the field on its own. © Business Monitor International Ltd Page 49 . and US majors Chevron and ConocoPhillips. Originally. In 2006. first stating that it would allow IOCs in contractors. and the French major lost its appeal against the decision. Rosneft cancelled a deal with Total to develop the Vankor oil field.Russia Oil and Gas Competitive Intelligence Report 2010 In July 2007. along with Norway’s Statoil and Norsk Hydro. Total was chosen as a partner in Shtokman. Gazprom has gradually softened its approach. and shortlisted Total. especially considering its lack of LNG experience at the time. This move raised doubts among analysts as to whether the company had the financial resources and technical ability for such a challenging project. following months of indecision by Gazprom. Since then. In October 2006. Gazprom had pre-selected IOCs to act as minority equity partners in the field’s development.

reaching 32bcm of output in 2009.3bn (H110) RUB86. and the discovery of new deposits in the Khancheyskoe field. The strong reserve growth was attributed to new wells at the Yurkharovskoe and Sterkhovoye fields. Novatek has been growing steadily.1bn (2008) Net income/(loss) RUB18. plus 60. Its proven reserves were 8. however.000b/d of oil and condensate. The big test for the company’s ambitions. production and reserves continue to rise steadily and profitability remained strong even in the 2008-2009 downturn.9bn (2008) Operating Statistics Net Condensate Production 60. as the company will be challenging Gazprom’s export monopoly.000b/d (2009) Net Gas Production 32bcm (2009) Proven Hydrocarbon Reserves 8.85bn boe by the end of 2009. © Business Monitor International Ltd Page 50 . Financial Statistics Sales RUB52.1bn (H110) RUB25. focusing its activities on Yamal-Nenets.7bn (2009) RUB22.9bn (2009) RUB76. While still a minnow in comparison with the state gas giant.85bn boe (end-2009) SWOT Analysis Strengths: Large untapped Arctic gas field Good reserve base Good Kremlin connections Condensate cash flow Weaknesses: Remote deposits High costs of LNG projects Kremlin’s anxiety over foreign partners in the Arctic Opportunities: Northeastern Passage Exports to Asia Threats: Lack of export markets Resurgence of Gazprom’s monopolistic instincts Cost inflation in the Arctic Market Position Novatek was founded in 2004 and is Russia’s largest private gas-focused player. although Gazprom has a 19% interest. On the back of good Kremlin connections and solid management. will come once its Arctic LNG projects get under way. The company is majority-owned by its management.Russia Oil and Gas Competitive Intelligence Report 2010 Novatek Company Analysis Russia’s largest private gas producer is going from strength to strength.

which is expected to begin exporting gas by about 2018.1% in Yamal LNG through a subsidiary as well as directly controlling a 19% stake in Novatek. Gazprom holds another 25. Novatek will need a well-heeled foreign partner but the company has given conflicting indications about when this will happen and who will be joining it. Although no firm project timetable has been set. which is keen to protect its quasi-monopoly on distribution. In June 2009. denying rumours of a planned share offer. in return for an 18% net-back transit fee. Latest Developments In May 2009. Although Inter RAO is already contracted to buy that gas from Gazprom. Strategy The company is pursuing a two-pronged strategy – boosting supplies to the domestic market while developing LNG export projects in Yamal. with 65bcm from 2010 to 2015 at a cost of about RUB177. Gazprom previously said it aims to start producing the first 15bcm of gas in Yamal by 2011 and then to gradually boost volumes to an ambitious 250bcm per year. The chief executive officers of the two companies agreed to begin third-party negotiations on the project following a meeting in August 2009. to the ire of the state gas giant. when Gazprom conceded the independent a right of access to the national pipeline. it is beginning to clash with Gazprom. Novatek was able to woo the utility with lower prices. have made overtures to Novatek about joining the Yamal LNG scheme. adding that Mitsui and Mitsubishi were also expected to obtain minority rights in the project. boasting the support of Genadiy Timchenko.Russia Oil and Gas Competitive Intelligence Report 2010 As the company aims to expand its share of the domestic gas market. Gazprom previously announced its intention to begin feasibility studies on an LNG plant on the peninsula in early 2010. Conoco has also previously expressed interest. To advance Yamal LNG. however. Through its controlling stake in the Yamal LNG operating vehicle. Novatek paid US$650mn in cash to acquire a 51% stake in Yamal LNG. Novatek. The project is known as Yamal LNG. Novatek is the operator of the South (Yuzhno)-Tambeyskoe gas field onshore the Yamal-Nenets region. In June 2009 Timchenko raised his direct stake in the company to 20. Novatek scored a major victory in November 2009.3bn (US$6bn). a former secret service official with close connections to Vladimir Putin.8%. Inter RAO UES. Gazprom shortlisted Total and Shell for participation in Yamal LNG. although the financial crisis is likely to delay this. as well as Qatar government. Amid much fanfare. This enabled Novatek to continue with the deal to supply subsidiaries of Russia’s largest power provider. in August 2010 Novatek shipped its first cargo of condensate using the Northern Sea Route (known as the Northeast Passage) to demonstrate the feasibility of selling its resources in the © Business Monitor International Ltd Page 51 . A number of IOCs. Yamal LNG is the operator of the South-Tambeyskoe gas field in the Yamal-Nenets region. is a formidable competitor.

A cargo of condensate was dispatched to China in Sovcomflot's hightonnage tanker Baltica with support from a nuclear icebreaker.400km around the Suez Canal to about 12.500km.Russia Oil and Gas Competitive Intelligence Report 2010 Barents Sea region directly to Asia. Novatek can reduce its normal journey to China and Japan of about 20. fuel costs and the risk of pirate attacks. © Business Monitor International Ltd Page 52 . By using the Northeast Passage. which would significantly reduce transit time.

Povolzhsk and central Siberia – and has recoverable reserves of 4. these problems now appear to be over for Russneft. Following its acquisition by Sistema in 2010. With the threat of a merger with Bashneft in the future. Operating Statistics Refining Capacity: 132.6bn bbl. the company’s independent existence seems to be at risk.000b/d in 2009. two refineries.14bn (2009) RUB137.25bn (2007) RUB9.Russia Oil and Gas Competitive Intelligence Report 2010 Russneft Company Analysis Although a relatively small producer by Russian standards. and a fuels terminal.082b/d (2008) 281. Russneft produced 255. one of Russia’s largest privately owned energy companies.45bn (2006) Net Profit : RUB15.260b/d (2007) 296.328b/d (2006) Financial Statistics Revenue: RUB116.10bn (2008) RUB113.942b/d (2009) 286. In 2009 the Orsk refinery © Business Monitor International Ltd Page 53 .58bn (2008) RUB12. It has 30 separate upstream operations split into four groups – West Siberia.57bn (2009) RUB10. In the downstream.94bn (2006) SWOT Analysis Strengths: Integrated upstream and downstream Diverse upstream oil portfolio Weaknesses: Declining oil production Oversupply in CEE refining capacity Opportunities: Growth in Russian oil production Rise in CEE regional oil consumption Threats: Vulnerable to state influence Large state-run competitors Market Position Russneft. Russneft is well integrated with upstream oil assets.594b/d Orsknefteorgsintez plant in Orsk (Orenburg) which produces fuels and the Neftemaslozavod plant which it acquired from TNK-BP in 2005 and is dedicated to producing lubricants and protective rustproof compounds. Ural. service stations.594b/d (2009) Oil Production: 254.70bn (2007) RUB102. was formed in 2003 when its owner Mikhail Gutseriyev left Slavneft and purchased some of its assets. the company’s main challenge during the late 2000s has been dealing with state influence and legal disputes. giving it the chance to stabilise its declining crude production. Russneft also owns two refineries: the 132. While this means the company is relatively safe from crude oil price fluctuations.

3bn (US$201mn) debt for the oil it bought from ZMB. The company also owns a network of 96 petrol stations (end-2009) and a crude oil terminal producing 140. The Kremlin's removal of an international search warrant for Gutseriyev in November 2009 enabled Russneft’s founder to resume ownership of the company. Gutseriyev then sold the company to a Basic Element (Basel) investment vehicle controlled by Oleg Deripaska. a major businessman generally seen as a Kremlin ally.5-8bn. helping it fill its refineries. in May 2010 that once Bashneft covers debts of US$7bn. giving it a utilisation rate of less than 80%. In January 2010 Gutseriyev agreed to take over Russneft from Deripaska. Although the settlement has diffused internal tensions. Sistema would allow the two companies to merge. after owner Gutseriyev was charged with tax evasion.000b/d.000b/d of oil in the next few years and to make an annual profit of US$1.5bn (RUB45. which is estimated at US$5. Recent Developments In September 2010 Sistema announced the process of restructuring Russneft’s debt was nearly complete. Following his return. Gazprom Neft wanted to buy Russneft by assuming its debt. Gutseriyev agreed to farm out 49% of Russneft to conglomerate Sistema for an undisclosed amount. while Deripaska valued the company at US$7.000-b/d in the Bryansk region. He added that Russneft intends to increase its annual oil production to 400. according to Vedomosti’s sources. Strategy Now that Gutseriyev's relations with the government have apparently been mended at present. In May 2010 Gutseriyev said Russneft was considering merging with Sistema subsidiary Bashneft in two to three years. the merged company would then conduct an IPO. In August 2009 Russneft and its partner MOL settled an internal dispute over the jointly operated Zapadno-Malobalykskoye (ZMB) field in West Siberia. Russneft's stake in the project remains threatened by a competing ownership claim from Rosneft.9bn). The Russneft stake will allow Sistema to balance out its downstream-heavy portfolio. Gazprom Neft appears to have baulked at Deripaska's reported valuation of the company. we expect the businessman's extensive experience in the oil sector to spur Russneft's development in the next few years. According to Gutseriyev. Leonid Melamed. The announcement followed remarks by Sistema President. According to the Interfax news agency. Gazprom Neft suspended talks over the purchase of Russneft in April 2009. until its shares were frozen by a district court in August 2007.Russia Oil and Gas Competitive Intelligence Report 2010 processed about 105. excluding debt. in return for assuming the company's US$6bn worth of debts and US$600mn in cash. Russneft agreed to pay RUB6. Russneft was breaking the mould of an increasingly state-dominated industry.6bn. The negotiations broke down after the © Business Monitor International Ltd Page 54 .

© Business Monitor International Ltd Page 55 . which agreed to restructure one of Russneft’s loans.Russia Oil and Gas Competitive Intelligence Report 2010 indebted Deripaska was thrown a lifeline by state-owned Sberbank.

The announcement was made by Rustem Khamitov. The company’s downstream assets include the 398. however.4bn for a 21. instead classing the stock as treasury shares.2mn b/d in 2009. Given Sistema's growth ambitions. Crude production averaged 1. The © Business Monitor International Ltd Page 56 . The deal gave Sistema a 76. Production of refined products in 2008 stood at 420. In March 2009.24bn) in upgrading its Bashkir refineries in 2011-2014.000b/d. in September 2010. which comprises the Ufaneftechim.Russia Oil and Gas Competitive Intelligence Report 2010 Surgutneftegaz – Summary Surgutneftegaz is the fourth largest crude producer in Russia. as it does not follow international accounting standards.5% stake in Bashneft. The company produced around 234. and accounts for around 10% of Russia’s refining capacity. the regional quasi-monopoly. In early-2010.2% stake in Hungarian oil and gas company MOL. Sistema reached a preliminary agreement to acquire 49 % of Russneft. paying US$1. Its reporting of profits. Sistema is now pushing to acquire full ownership of the Bashir assets.000b/d Kirishi Oil Refinery (KINEF) in the Leningrad region. however. further acquisition of oil assets in Russia and the former Soviet Union is to be expected in the near future. Marketing arm Bashkirnefteproduct has around 317 service stations in the region.1bcm. helping it to fill its refineries. Prime Minister Vladimir Putin himself owns 37% of Surgutneftegaz. Bashenft holds 2. According to a statement by Russian strategist Stanislav Belkovsky to German newspaper Die Welt in 2007. Further upstream growth is expected to come from the once-sleepy Bashneft. Sistema will reportedly invest RUB100bn (US$3. with Sistema targeting 7. Retail assets include a network of around 300 service stations in Northwestern Russia.8% crude output growth in Bashkiria in 2010. Its traditional base is southern West Siberia but it has been expanding into Timan-Pechora and Khanty-Mansyisk in the north and views Eastern Siberia as another growth region. the governor of Bashkiria. is somewhat erratic. Sales in 2008 amounted to RUB547bn. The company’s biggest revenue earner. Surgutneftegaz is an opaque company. Novoil.2bn of proven reserves and is the second largest producer in the Volga-Urals region after Tatneft. is its large affiliated refining business. plus five affiliated refining and marketing concerns. Sistema – Summary Telecom-focused Russian conglomerate Sistema made a big entrance into the oil industry in April 2009. to the chagrin of the Hungarian government. It moved 42% of its shares to a separate company in 2003 and since then has not revealed the ownership of that stake. Surgutneftegaz made its first foray into international markets. acquiring six major upstream and downstream businesses in the Republic of Bashkortostan (Bashkiria) in the Urals region. The Russneft stake will allow Sistema to balance out its downstream-heavy portfolio. Ufaorgsintez and Ufimskiy plants.000b/d from around 140 fields in Bashkiria and neighbouring Tatarstan and Udmurtia in 2008. gas output totalled around 14.

3bn bbl of crude and 485bcm of potential recoverable gas resources. In spite of the chequered history of its Russian operations. Oil production from Chayvo.000b/d in 2009. Previously. Japex. Halliburton has been working at Salym since 2005 and will now remain there until at least 2013. Chayvo also © Business Monitor International Ltd Page 57 . Shell held a 55% stake but now retains 27. Odoptu and Arkutun-Dagi offshore fields. Shell’s former CEO Jeroen van der Veer also said the company was looking to discuss joint projects with Gazprom in the Far East. This was followed in June 2009 by Putin’s informal invitation to Shell to join the Rosneft/Gazprom-led Sakhalin-III and -IV project. The Salym fields started commercial production in December 2005. Upper Salym and Vadelyp fields. having relinquished control to Gazprom in December 2006 after a drawn-out battle. averaging 193. Royal Dutch Shell – Summary Anglo-Dutch Shell is no longer the leading member of the US$10bn Sakhalin-II integrated project in the Far East. In February 2009. In December 2009 Sistema signed a strategic cooperation agreement with India’s ONGC for joint energy projects in the FSU. India's OVL (20%) and a consortium of Japanese companies JNOC. Shell is also involved in the Salym group of oil fields in Western Siberia through a 50:50 Salym Petroleum JV with Sibir Energy.Russia Oil and Gas Competitive Intelligence Report 2010 move will help it remain competitive in the fuels export market as local rivals such as TNK-BP invest heavily in their own plants. Shell has proposed developing Yamal reserves with Gazprom. Production peaked the very next year at around 225. While Itera is keen to establish itself as a leading ‘independent’ Russian gas producer. An opaque company. it has backed a continuation of Gazprom’s near-monopoly. which were abandoned by BP. The partners are developing the West Salym. mostly from West Salym. peaking at around 160. Itera – Summary Itera is another significant domestic Russian gas player. working alongside two units of Rosneft (20%). began in 2006. which hold an estimated 600mn bbl of crude reserves.5% minus one share. the only producing field so far. ExxonMobil – Summary US major's subsidiary Exxon Neftegas (ENL) operates the US$12bn Sakhalin-I project with a 30% stake. In March 2009 Salym Petroleum extended a drilling contract with US-based oil field services company Halliburton in a deal worth US$100mn. a Gazprom Neft subsidiary.000b/d (somewhat below initial expectations) and has been declining since. which are estimated to contain up to 2.000b/d in 2008 and 165.000b/d in 2009. The partners are developing the Chayvo. Itera works close with Gazprom and has access to its pipeline system. it has traditionally been a gas trader but in the 2000s got involved in production. Itochu and Marubeni (30%).

7% from 2009. which runs from Russia through Belarus and Poland into Germany. particularly the ESPO. Once fully onstream. The company has argued the increases are necessary to maintain its infrastructure and finance new projects. present significant export potential.4% and 10. has previously favoured shipping the gas as LNG from the Sakhalin-II export terminal. Exxon announced in January 2010.505km from Tengiz in Kazakhstan to the Russian Black Sea port of Novorossiysk. Gazprom. a natural gas field with associated condensate. No production estimates for the Odoptu fields have been released. In May 2010 Exxon said that the Odoptu field will increase output at Sakhalin-I by 30.Russia Oil and Gas Competitive Intelligence Report 2010 produces gas. a pipeline. In December 2008.000b/d CPC system. In late-April 2009. Progress at Sakhalin has been slower than expected owing to disagreements between Gazprom and Exxon over gas marketing rights. and an LNG processing plant and export terminal.000b/d when it comes onstream in H210. although more recently it has insisted the gas is needed to supply the domestic market to support industrial expansion in eastern Russia. Exxon resumed work at Sakhalin-I after the energy ministry finally approved its US$2bn cost plan for that year.000km of long-distance pipelines. Crude from Odoptu will be sent by pipeline to the Russian mainland for export via the De-Kastri terminal in the Khabarovsk region. with output expect to eventually reach 10bcm per year. Delay in the budget approval forced Exxon to briefly halted work on the project in February 2009. In 2008. the government approved Transneft’s request to increase oil transportation tariffs by 15. on the other hand. Transneft – Summary State-owned Transneft is Russia’s oil pipeline monopoly. an option it has under the project's PSA. Oil production from Odoptu will offset declining output from Chayvo. the project will produce © Business Monitor International Ltd Page 58 . which formally began operations on February 18 2009 and which incorporates an oil field with associated gas. Currently. the news will present another blow to Russian oil producers that are already exporting crude at a loss after paying export duties.7% respectively. transportation tariffs and taxes amid subdued oil prices. Sakhalin Energy – Summary Sakhalin Energy operates the Sakhalin-II project. The Odoptu field is due onstream in H210. however. Rising output volumes. It transports about 93% of Russia’s oil production. Transneft is also the largest shareholder (31%) in the 750. The Odoptu Phase 1 development will utilise the existing midstream infrastructure connected to the Chayvo field. Exxon supports the construction of a pipeline to China. including the Druzhba (Friendship) line. Transneft raised its oil shipping fees in January and August by 19. operating some 50. consumption of Sakhalin-I's gas remains confined to the Khabarovsk region. which stretches 1. While this increase is lower than the 21% rise requested by Transneft.

when it launched a 49:51 JV with Rosneft to develop Sakhalin-IV and -V areas in the Sea of Okhotsk.45bn for its majority stake. with reserves estimated at up to 3bn bbl of oil and 255bcm of gas.000tpa of LNG from Sakhalin-II from 2011 without disclosing the financial terms. As of December 2006 Sakhalin Energy is majority owned by Gazprom (50% plus one share) alongside former majority owner Shell (27. In March 2009. BP and Rosneft said that after evaluating extensive seismic data they decided not to proceed to the drilling phase. The company has two major projects in Russia. any commercial discoveries at the KG block are most likely to be developed in conjunction with the Sakhalin-III project further south. The project’s lifespan is put at over 40 years. Mitsubishi (12. It came onstream in July 2008 and produced around 1bcm and 6. Following extensive interpretation of seismic data. Gazprom paid US$7. BP and Rosneft also relinquished the East Schmidt Block at Sakhalin-V. The first. has chosen to keep the other permit in the Sakhalin-V project.6mn tpa of LNG and around 900. Two exploration wells were drilled at the Medved and Toiskaya structures in 2007 but both disappointed. while the remaining third goes to South Korea and North America. Estimated reserves at the only certified discovery at the block. dubbed the Kaigansko-Vasyukanskoye Sea field. however. are put at 118mn bbl of oil and condensate (ABC1). the US$3bn Yuzhno (South) Russkoe gas project.5%) and Mitsui (10%).000b/d of condensate.5% minus one share). with the British major pulling out of the CPC pipeline consortium and significantly reducing its Sakhalin exposure. BP – Summary BP's presence in Russia is now concentrated on the TNK-BP JV.5bcm and 55. Wintershall – Summary Wintershall is an upstream subsidiary of German chemical group BASF. The partners drilled two deepwater wells at KG in 2006 and have been sufficiently encouraged by the results to shoot more seismic data in 2010 in preparation for further drilling. The second project is the US$1bn Achimgaz JV in the YamalNenets region. In February 2010. With all synergy between Sakhalin-IV and Sakhalin-V now lost. Roughly two-thirds of Sakhalin-II’s LNG exports will be exported to nine utilities in Japan. The JV. again owing to poor commerciality. the Kaigansky-Vasuykanskiy (KG) Block. The companies have a preliminary agreement in place to supply over 800bcm of gas to Europe to 2043 through BASF’s distribution arm Wingas. in which Gazprom and Wintershall are equal partners. The most promising acreage in Sakhalin-IV was thought to be the West Schmidt Block. and reach plateau production rate of 25bcm per annum in mid-2009. BP has been active in Sakhalin since 2006.000b/d of crude oil. Osaka Gas signed an SPA to buy 200. © Business Monitor International Ltd Page 59 . BP appears to have decided that the block holds little commercial prospects and in March 2009 abandoned the Sakhalin-IV project. holds recoverable natural gas reserves of more than 600bcm.Russia Oil and Gas Competitive Intelligence Report 2010 9.000b/d of condensate in 2009 and is expected to peak at 7.

Rosnedra extended Lundin’s exploration permit for the Laganskiy Block until August 2014. passed in May 2008. or 586mn bbl. where the October 2008 Morskaya discovery is estimated to hold 230mn boe of recoverable reserves. leaving Gazprom 50% plus one share. known by its Russian acronym INK. however. CEO Wolfgang Ruttenstorfer said on May 20 2010. through subsidiary Petrom's majorityowned Ring Oil Holding and Trading. has disappointed after the Petrovskaya-1 exploration well came up dry in November 2009. Russia's natural resources ministry said in October 2009 that reserves at the block could be as much as 80mn tonnes. It was the first © Business Monitor International Ltd Page 60 . According to Russian's law on strategic deposits. was established in November 2000 by bringing together several small oil and gas producers in the Irkutsk region of East Siberia. this exploration success may be the reason for OMV's decision to exit Russia. located in Saratov's Kamenskiy licence. although it did not specify the level of certainty attached to this estimate. while two gas-bearing formations produced a combined 4. Irkutsk Oil Company – Summary Irkutsk Oil Company. Gazprom has a call option to acquire a 50% plus one share stake. In February 2009. Lundin has also agreed a call option to acquire an additional 30% stake from remaining shareholder Gunvor. In August 2009. Although Lundin currently holds a 70% interest in Laganskiy. Ironically. The contract extension will allow Lundin to delay the drilling of the Morskaya-2 appraisal well until 2010. The Petrovskaya structure. Petrom reported its first Russian exploration success at the Lugovaya-1 well.Russia Oil and Gas Competitive Intelligence Report 2010 Lundin Petroleum – Summary Swedish independent Lundin Petroleum has interests in four production licences and one exploration licence in Russia. Its Russian assets. Should the natural resources ministry's reserves estimate be accurate. which will test the western section of the discovery. which was estimated to hold reserves of up to 300mn bbl.500b/d of light sweet oil in one zone. Should both options be exercised. an oil trader. OMV – Summary Austria's OMV is looking to divest its Russian exploration assets and is talking to potential buyers. the state is empowered to take over oil exploration licences where recoverable reserves exceed 70mn tonnes (513mn bbl). the Kamenskiy licence would be subject to this law.' the fact that licences are subject to state appropriation is a major risk and has contributed to negative investor perception of Russia. are eight exploration blocks in the region of Saratov and two blocks in the region of Komi. Well tests showed a flow rate of more than 2. Although the law provides for compensation of costs plus a 30%-50% 'premium.000boe/d of sweet gas and condensate. Lundin would retain 50% minus one share in the block. Its most prospective asset is the Laganskiy (Lagansky) Block in the Northern Caspian.

giving Aladdin a total of eight Russian licences. The agreement formalises GTL plans announced by the INK chairman in September 2009. The technology would be applied at the Mogdinskiy Severniy. which covers an area of 4. Aladdin's future growth prospects will depend on the commercialisation of some of its other licences. The company owns Licence 61. with 100%. the Lineynoye and Tungolskoye fields hold total proven. In early December © Business Monitor International Ltd Page 61 . all in north-western Russia. Trial production started in March 2010. with 8. In addition. According to consultants Ryder Scott.991sq km. The Sediolskoye supply deal will provide Aladdin the funds towards the development of its remaining licences. while the additional and potential prospects are estimated to hold 3P reserves of 253mn bbl and exploration resource reserves (4P) of 100mn bbl. Bolshetirskiy and Yaraktinskiy Zapadnyy blocks. PetroNeft – Summary London-listed PetroNeft was established in 2005 to develop assets in West Siberia.1% held by the European Bank for Reconstruction and Development (EBRD). The company currently holds 11 oil and gas fields. after three years of net losses. On October 14. There are several developments in the pipeline.9mn) in Russia since 2006. particularly the oil-bearing West Uthinskoye licence. Production in 2008 stood at 6. West Uthinskoye and two licences in the Timan-Pechora Basin. which are being developed by INK-Sever. which should benefit from connection to the ESPO export pipeline. state-run Japan Oil. a 51:49 JV between INK and JOGMEC. Aladdin has invested a total of NOK375mn (US$66. the company announced that it was increasing its P2 reserve estimates for the Middle Sediolskoe field to 383Mcm. INK has a strong focus on gas capture and is pursuing various policies to eliminate flaring at its fields. Aladdin Oil & Gas – Summary Oslo-listed Aladdin Oil & Gas was founded in 2006 and is solely focused on Russian exploration and production. In October 2009 Aladdin signed an agreement with Gazprom’s subsidiary KomiRegionGaz to sell 46Mcm per annum for five years from its Middle Sediolskoe field in the Komi Republic.Russia Oil and Gas Competitive Intelligence Report 2010 to bring onstream oil production in Irkutsk and remains the largest producer in the region. with the price for Q409 set at RUB1. Gas and Metals National Corporation (JOGMEC) signed an agreement with INK to study the potential application of gas-to-liquids (GTL) technology at their joint projects. Aladdin is hoping to produce 2.770/mcm (US$60/mcm). In November 2009. The licence is also located in the Tomsk region and contains two proven oil fields – Lineynoye and Tungolskoye – as well as around 25 additional prospective areas and further potential prospects that have been identified through seismic surveys. The gas price for deliveries will be adjustable. probable and possible (3P) reserves of 70.6mn bbl.000boe/d. The company appears to be owned by its management. It holds four licences through its 100%-owned Geotechnologia subsidiary: Middle Sediolskoye. According to Nedrelid.650boe/d in Russia in 2010. all operated by separate subsidiaries. the company's 100%-owned Orneftegaz and Veselovskoe subsidiaries are exploring in the south of the country: at Bogdanovskoe in the pre-Caspian depression and in the Volga-Ural Basin.

to develop other discoveries. The licence does not include two producing oil fields – Grushevoye and Lomovoye – that are located in the area. the company reported revenues of US$1. in what was at the time one of the largest deals by a Russian-based independent. and under the agreement the company can use the existing infrastructure at the two producing fields. Urals was forced to agree to divest to Sberbank its stakes in key Taas Yuriakh Neftegazodobycha and Dulisma operating units in mid-2009 as part of the loan repayment deal. The US$2. which are estimated to hold 55mn bbl of oil in place. However. Revenues were down from US$2. PetroVietnam is seeking government approval to invest US$614mn in an oil E&P JV with Zarubezhneft. As of end-2009. By early-2008 the company held P2 reserves of 822mn boe.Russia Oil and Gas Competitive Intelligence Report 2010 2009. In November 2007 Urals acquired a 35. Others – Summary Spanish major Repsol YPF is reportedly in talks with Rosneft about acquiring a 25% stake in the Sakhalin-III project.000b/d and a retail network of 255 stations in eastern Russia. PetroNeft announced plans to drill nine wells on the licence. with the first one scheduled to be spudded in April 2010. Alliance's shareholders control 60% of the new entity and WSR's the remaining 40%. while profits were up from US$45. is the company's second in the area. The company’s future now looks uncertain with a hostile takeover or liquidation being a large threat. PetroNeft believes that two undeveloped discoveries – Ledovoye and Sklonavaya – have significant potential. the company had proven and probable (P2) reserves of 526mn bbl. Ural’s aim to raise output to 75. In December 2009.97mn in the previous year. PetroNeft's three-year exploration programme will include the reprocessing of seismic and well data. beating the only other bidder.72bn in 2008. During FY09. Alliance Oil – Summary Independent oil company West Siberian Resources (WSR) merged with Russia-focused mid-sized Alliance Oil in April 2008. the acquisition of 750km of new seismic data and the drilling of one well. refining capacity of 70. Under the agreement.000b/d by 2013 is no longer feasible. The partners were awarded four oil blocks in western Siberia in May 2008.700b/d. However. output of 42. which covers 2. Its shares were suspended from AIM in July 2009.5bn deal created a vertically integrated player with assets in Russia and Kazakhstan. The agreement was implemented through the award of the licences in Yamal-Nenets and also extends the life of the © Business Monitor International Ltd Page 62 . The licence. It is targeting three drilling prospects. including the Vasyugan-Raskino oil pipeline.447sq km. Rosneft.5% in Taas. AIM-listed Urals Energy is a sizeable independent focused on East Siberia.73bn and net profit of US$345mn. Russia and Vietnam signed an agreement to deepen E&P cooperation in 2006. PetroNeft was awarded the Ledovy licence in the Tomsk region. following the collapse of a loan restructuring deal with Sberbank in the wake of the global financial crisis.

In October 2009.Russia Oil and Gas Competitive Intelligence Report 2010 companies' first JV. which will explore blocks N1.5mn and is expected to be completed by the end of February 2010.365-100. In December 2009. © Business Monitor International Ltd Page 63 . N2. Exillon believes the assets hold significant upside potential and is seeking to raise funds for their development through an IPO. Vietnam-based Vietsovpetro.457b/d within five to seven years. The Exillon WS and TP fields were discovered in 1971 and 1988 respectively and are both producing an unspecified small amount of light oil. according to a report in Japanese newspaper Yomiuri Shimbun citing unnamed industry sources. receiving permits for 10 oil fields in north-western Siberia. PetroVietnam also established a gas partnership with Gazprom. which is registered in the Isle of Man and headquartered in Dubai. which controls a 51% stake in the JV. acquired its first assets in early 2009. Exillon.25bn JV.5% stakes respectively in the adjacent Sakhalin-II project. Despite the fields' long production history. the partners were planning to start drilling at the fields by end-2008 and expect to produce 80. again mirroring a sister JV in Vietnam. According to Zarubezhneft. Zarubezhneft. which operates five fields in the Timan-Pechora Basin in the Komi Republic and Exillon WS. the 49:51 Gazpromviet. Japan's Mitsubishi and Mitsui are interested in acquiring stakes in the Sakhalin-III project in Russia's Far East. N3 and N4 in Nenets. Their intention to farm in to the Gazprom-led Sakhalin-III development is therefore believed to be motivated by the expected cost synergies with Sakhalin-II and a desire to secure additional gas supplies. Its operations are split between two subsidiaries: Exillon TP. will provide the remainder of the capital. making it the first share offering by a Russian oil producer since the start of the financial crisis in mid-2008. The new JV will jointly develop the Nagumanov field in the Urals region. The A-13 well is estimated to cost around US$4. PetroVietnam would have a 49% stake in the US$1. which operates another five fields in Khanty-Mansiysk. Western Siberia-focused independent Exillon Energy launched a successful US$100mn IPO on AIM in December 2009. which supplies LNG to Japan. AIM-listed Matra Petroleum spudded its first appraisal well at the Sokolovskoe field in the Arkhangelovskoe licence in the Orenburg region of the Urals. The blocks currently consist of 13 fields and hold estimated oil reserves of around 572mn bbl. The Japanese companies already hold 10% and 12.

State gas monopoly Gazprom provides subsidised gas to the power industry through a deal with former monopoly supplier Unified Energy System (UES).0% growth over the period. The collapse of the Soviet Union initially precipitated a dramatic decline in energy generation. many of which are incapable of meeting modern fuel standards. In 2009.4%. Russia's estimated 2009 market share of 50.0bn bbl of proven oil reserves to Russia.7% by 2014. coal at 14. voiced concerns over the region's ability to sustain coal production growth. the governor of the Kemerovo region. These environmental problems may hinder Russia's desire to keep increasing coal production. According to the government's energy strategy. He noted that the region had already seen almost 200 rivers ruined after being used for mining activities. with 2008 output of 327mn tonnes. the end-2009 Oil & Gas Journal (OGJ) annual survey suggests just 60bn bbl. There are 42 oil refineries in Russia. Russia's power sector includes more than 440 thermal and hydro-power plants (approximately 80 of the former are coal-fired). With 157bn tonnes of proven coal reserves. The system has a total electric generation capacity of almost 216 gigawatts (GW).3% share of PED. and Russia meets 22% of the world's gas demand. A few generators in the far-eastern part of the country are not connected to the power grid. Total crude distillation capacity is around 5. plus 31 nuclear reactors. hydro at 5. © Business Monitor International Ltd Page 64 . After a slight decline in 2002. followed by a gradual recovery (up 18% between 2000 and 2009).4% is set to fall to 49. Russia's adherence to the stipulations of the Kyoto Protocol may lower utility sector demand for coal. Poor management during the Soviet era and a sharp decline in demand during the early 1990s undermined the coal industry. with 2009 generation at an estimated 984TWh.6% and nuclear with a 5. In a December 2008 BBC interview. It is followed by oil at 18. However. (down 18% between 1992 and 1999). meaning that price increases as part of a deregulation programme could make gas too costly for much of the Russian population.543mn toe by 2014. while there appears to be significant reserves potential in its share of the Caspian Sea. Gas reserves of 43.Russia Oil and Gas Competitive Intelligence Report 2010 Market Attractiveness Analysis Russia Energy Market Overview The June 2009 BP Statistical Review of World Energy attributes 79.55mn b/d.3%. production rebounded in 2003-2008. Russia should produce more than 400mn tonnes by 2020. which is responsible for over half of the country's coal production.2% of 2009 primary energy demand (PED).302bcm (BP data) account for more than 30% of the world total. Large parts of Russia are under-explored. Russia ranks second in the world behind the US.6% of the world's total at an estimated 10. Regional energy demand is forecast to reach 1.15mn b/d. which is a possibly conservative total that still represents almost 7% of the world's oil. representing 17. accounting for an estimated 56. oil production was around 11. Gas is the dominant fuel in Russia.

The oil exported via Kozmino port is sourced from East Siberia. which is operated by national oil midstream monopoly Transneft. with a further six approaching 25 years of age. even fuels used in Russia will need to meet higher quality standards. Russia has adopted the European Emissions Standards for fuels. However. many plants are due for decommissioning. Russia phased out Euro-2 standard fuels in 2008 and hopes to phase out Euro-3 by the end of 2009.Russia Oil and Gas Competitive Intelligence Report 2010 The Russian government has stated that it intends to expand the role of nuclear and hydro-power generation in the future to allow for greater export of fossil fuels. Kozmino terminal. According to the report. The port sent its first cargo to Hong Kong. is intended to be the terminus of the Eastern Siberia-Pacific Ocean (ESPO) pipeline. the port of Kozmino. in the Irkutsk region. Russia's nuclear power facilities are ageing. which is due to be completed in 2014-15. Russia has an installed nuclear capacity of more than 21GW. both Gazprom and Rosneft would be allowed to share access with their subsidiaries and could farm out a stake of up to 50% in offshore projects to foreign companies. In the Moscow Times article. The Skovorodino oil terminal is the end point of Phase 1 of the ESPO pipeline. From there it is sent to the Skovorodino oil terminal. Donskoy claimed that the Natural Resources and Environment Ministry believes the two companies have insufficient resources to develop Russia's continental shelf on their own. However. Russia's newest crude oil export terminal. according to a report by the Moscow Times newspaper. Euro-5 has already been introduced for most vehicles and Euro-6 is slated for implementation in 2014/2015 for all vehicles. This means that while upgrades to facilities are particularly important when the refined products are destined for export to the EU.and nine of Russia's plants are between 26 and 30 years old. began operations in December 2009. more than double the 2003 level. Half of the country's nuclear reactors use the RBMK design employed in Ukraine's ill-fated Chernobyl plant. but Kozmino will receive oil delivered by rail from Skovorodino until the second phase has been completed. which started operations in October 2009. published in March 2010. In Europe. The proposal would also allow any of the subsidiaries of the two © Business Monitor International Ltd Page 65 . the proposal would allow subsidiaries of the two companies to join them in offshore exploration and could lead to international oil companies (IOCs) also becoming involved. The working life of a reactor is considered to be 30 years -. distributed across 31 operational nuclear reactors at 10 locations. all west of the Ural Mountains. which cited deputy energy minister Sergei Donskoy. although on a different timeframe. Euro4 is expected to be allowed until 2013. The Russian Ministry of Atomic Energy predicts that by 2020 nuclear generation could reach 300TWh. Under a plan drafted by the ministry. Russia may relax rules limiting offshore exploration and production (E&P) in the country to Rosneft and Gazprom. and meeting this target will require between US$5bn and US$10bn per year of investment over the next decade. It is transported to Kozmino from the Meget railway terminal.

Jim Mulva. It is arguable that this has damaged Russian investment in offshore areas. however. preventing other Russian and international companies from participating. which is most acute in the poorer Former Soviet Union (FSU) countries that now serve as transit states on the way to the EU.Russia Oil and Gas Competitive Intelligence Report 2010 companies to develop offshore fields on their own or in partnership with other companies. The fact that offshore projects are effectively limited to just two state companies. The country has an extensive gas export pipeline network bound for the western markets. The Kremlin sees Asia the future source of export growth. According to the Moscow Times. gain greater security of transport and maintain a closer grip on ex-communist states. a rate which Donskoy claimed would mean ministry targets for offshore areas would take 165 years to fulfil. Some of the infrastructure. companies applying to work on the fields must have a five-year record of working on such projects. the two companies invested only RUR56. In 2008.9bn at current rates) in E&P offshore Russia. but gas pipeline projects to the east of the Ural Mountains remain in the planning stages. © Business Monitor International Ltd Page 66 . offshore fields in Russia can only be developed by companies in which the government owns a stake of 50% or greater. that it is unclear whether the proposal has been submitted to the Russian cabinet. frequent pipeline incidents and the capriciousness of the Russian weather. Russia is the major gas exporter to Europe but the reliability of its supplies in the past few years been causing concern. it could therefore present significant opportunities to IOCs.4bn (US$1. the CEO of ConocoPhillips. Under legislation passed in 2008. has slowed the development of these areas. Russia has been looking to construct new pipelines bypassing Eastern Europe. in which Conoco holds a 20% stake (which it is reducing to 10%). In order to diversify its export routes. has fallen into considerable disrepair. If the ministry proposal is accepted. however. effectively limiting participation to Gazprom and Rosneft. thanks to pricing disputes with transit states such as Ukraine. The newspaper reported. claimed in March 2010 that the legally-privileged position of Gazprom and Rosneft had led to slower growth for their privatelyowned rival Lukoil. In addition.

a total capacity of 1.000b/d (10%).000b/d (16%) and TNK-BP with 560. Following the introduction of tighter regulation regarding the lifecycle of road bitumen in 2010. There are also several slightly smaller refiners such as Surgutneftegaz. Refineries in Russia are mostly located west of the Urals. which can produce the company’s polymer-modified TNK Alfabit brand of premium bitumen. TNK-BP looks likely to increase investment at the plant. Komsomolsk Refinery: Rosneft’s Komsomolsk refinery in Russia’s Far East is supplied with crude oil by rail from Western Siberia. The few companies that do not have upstream involvement generally operate plants of less than 50. Ryazan Refinery: TNK-BP’s Ryazan facility is the company’s largest and most up-to-date refinery.000b/d (18%). Large refining cities include Ufa.000b/d of Russian capacity. a category that together accounts for around 115. Rosneft is the largest player in the Russian refining sector. Planned Additional Capacity: In June 2007. in partnership with Surgutneftegaz. As part of its wider downstream expansion plans. Bashneftekhim and Tatneft. with a nameplate capacity of 340. Other major companies involved in refining include Gazprom Neft with 964. introducing Euro4 standards at the start of 2010 and preparing for the introduction of Euro-5 standards at the start of 2014.Russia Oil and Gas Competitive Intelligence Report 2010 Oil & Gas Infrastructure Oil Refineries With a total processing capacity of 5. as well as a small number of companies operating individual plants. South Korea and Vietnam via the Nakhodka tanker terminal and the Vanino tanker terminal. over 2. with seven major refineries. allowing companies to supply their own refineries through Transneft’s pipeline systems. Russia is the world’s third largest refiner after the US and China. particularly diesel. Although the vast majority of this capacity dates from Soviet times. Rosneft is currently upgrading its Tuapse and Komsomolsk refineries and said in 2008 that it was looking into constructing a new 240. allowing many companies to export refined products. Samara and. the capital of Bashkiria. Yaroslavl. Russia has also followed suit in mandating cleaner fuels. Reports in October 2009 © Business Monitor International Ltd Page 67 . to the EU. The motor and jet fuels produced by the refinery are currently exported to Japan.000b/d. as well as by pipeline from Sakhalin from Rosneft subsidiary Sakhalinmorneftegaz. Almost all refiners in Russia also control upstream assets.62mn b/d in 2009 according to the BP Statistical Review. the country’s largest players such as Rosneft have invested in upgrading their facilities to meet stringent fuels quality standards.13mn b/d and a market share of nearly 21%. Lukoil with 894.000b/d. The country’s major refining centre is in the VolgaUrals regions around the Republics of Tatarstan and Bashkiria. Rosneft CEO Sergei Bogdanchikov announced plans to expand the company's refining capacity ninefold by 2015.000km away. further to the west. although significant capacity exists in Siberia – particularly West Siberia – along major pipelines.000b/d plant near the port of Primorsk in Russia’s Far East. the company is investing US$150mn in the construction of an isomerisation unit at the plant.

New generation plants making products compatible with European standards allow the company to export any surplus and position it well for the eventual tightening of transport pollution emissions in Russia. © Business Monitor International Ltd Page 68 .Russia Oil and Gas Competitive Intelligence Report 2010 suggested that the company was considering developing a 400.000b/d refinery in the Primorskiy region with China’s Sinopec.

000 279.142 242.000b/d refineries - 240.971 5.720 146.000 126.657 140.962 214.387 130.160 285.000b/d 1954 1951 1942 1982 1934 1945 1935 1934 Uses Rosneft crudes 2002 1929 Specialises in motor fuels 1998 15 sub-50.000 115.423.000 335.176 359.585 132.200 168.200 340.000 286.000 84.995 234.540 Owner (Contractor) Rosneft Lukoil TNK BP Surgutneftegaz Slavneft Gazprom Neft Bashneftekhim Lukoil Sibir Energy Bashneftekhim Rosneft Lukoil Bashneftekhim Gazprom Rosneft Rosneft Rosneft Sidanco Rosneft TNK BP TNK BP Lukoil Tatneft Rosneft Alyans Group TNK BP - Completed 1955 1958 1960 1966 Details Uses West Siberian Crude 1955 1951 1958 1938 1937 1942 1957 Operating at 200.493 104.640 134.468 94.300 160.518 120.076 200.000 Rosneft 2014 With Surgutneftegaz Source: BMI © Business Monitor International Ltd Page 69 .Russia Oil and Gas Competitive Intelligence Report 2010 Table: Refineries Of 50.900 290.000b/d Capacity Or Greater In Russia Refinery Angarsk Kstovo Ryazan Kirishi (Kinef) Yaroslavl (Yanos) Omsk Novo Ufa Perm Moscow Ufa Syzran Volgograd Ufaneftekhim Salavat Novokubishevsk Komsomolsk Achinsk Cracking Saratov Samara-Kubishev Orsk Saratov Ukhta Nizhnekamsk Tuapse Khabarovsk Nizhnevartovsk Others Total Capacity Planned Additional Capacity Primorsk Capacity (b/d) 385.594 130.000 184.

was completed in 2001 and exports around 1. The port sent its first cargo to Hong Kong. with Transnefteproduct beginning shipments in 2008. The Skovorodino oil terminal is the endpoint of Phase 1 of the ESPO pipeline. Surgutneftegaz and TNK-BP. according to ESPO's website. according to the EIA. the port will play a major role in Russia's energy export sector. The port of Kozmino is a vital part of Russia's Asia Pacific economic strategy. to become Russia's third largest oil export facility. around 1mn b/d of Russian crude is exported via the Black Sea (mainly through Novorossiysk). then sent through the Bosphorus to the Mediterranean.Russia Oil and Gas Competitive Intelligence Report 2010 Oil Terminals/Ports The country's biggest Baltic Sea port is located in Primorsk. Additional export capacity is located at the Black Sea port of Novorossiysk. Transneft claimed that two plans had been developed to reduce or cease oil exports via the Bosphorus in order to provide customers for the Samsun-Ceyhan oil pipeline. Russia’s second largest oil export facility. Each railway oil cargo will hold 4. Oil Pipelines East Siberia Pacific Ocean (ESPO) Once completed. Kozmino Russia's newest crude oil export terminal. although it claims export capacity of around 3mn b/d.5mn b/d. is intended to be the terminus of the Eastern Siberia-Pacific Ocean (ESPO) pipeline. the 4. Transneft’s ESPO will be the first Russian pipeline © Business Monitor International Ltd Page 70 . it offers links to the main regional consumers: Japan. exporting Russian crude and oil delivered by pipeline from Kazakhstan and Azerbaijan. The Pacific port of Kozmino was completed in December 2009. underlining its focus on catering for Asian demand. which is due to be completed in 2014-15. Novorossiysk The port of Novorossiysk is Russia’s main Black Sea port for oil.700-35. with additional ports in St. the port of Kozmino. In June 2010. began operations in December 2009. which is operated by national oil midstream monopoly Transneft. but Kozmino will receive oil delivered by rail from Skovorodino until the second phase has been completed. The port will provide an outlet to oil producers in East Siberia. According to the EIA. Once the ESPO pipeline is extended to Kozmino. South Korea and China. near St Petersburg. The Kozmino terminal.200bbl). Located in the Sea of Japan. The terminal exports refined products as well as crude. making it the world’s longest oil pipeline. Kozmino exports East Siberian crude that is transported from the Meget railway terminal in the Irkutsk region to the Skovorodino oil terminal. Primorsk Primorsk. which started operations in October 2009. including Rosneft.700km ESPO pipeline will overtake the Europe-bound Druzhba (Friendship). Petersburg and Vysotsk.800 tonnes (33.6004.

6mn b/d. whose construction was completed in June 2010. ESPO is being built in two stages. The pipeline is expected onstream by October 31 2010. The link will cost US$1. The pipeline was designed to expand the existing © Business Monitor International Ltd Page 71 . TNKBP and Surgutneftegaz from untapped fields in East Siberia. ESPO will be supplied primarily by Russian oil companies Rosneft. It is hoped that this will allow Russia to replace dwindling output from West Siberia.Russia Oil and Gas Competitive Intelligence Report 2010 transporting oil to Asia. Baltic Pipeline System The Baltic Pipeline System (BPS) has two phases: BPS-1 and BPS-2. Construction of a second phase of the network. The pipelines transport oil from West Siberia and the far north of the country to the Baltic Sea terminal of Primorsk. The Purpe-Samotlor pipeline will replace the longer and smaller-diameter lines for transporting Vankor crude. On August 29 2010. environmental concerns and price disputes.34bn and is due to be commissioned in 2012. missing the end-2008 deadline by a year and coming online in late-2009. The 70km pipeline will run to the Chinese border. which will supply northern China with 300.000b/d. which could be expanded at a later date. started in June 2009. via a 70km connector. The first 2. Purpe-Samotlor Transneft began constructing a new major link from the Yamal Autonomous District in March 2009. The second phase is not expected to be completed until 2014/2015. oil from Skovorodino is transported by rail to the Pacific port of Kozmino for export. Initial capacity will be 500. The second leg of ESPO will cover 2. ESPO will branch out to China. From Skovorodino.000b/d. known as BPS-2.100km from Skovorodino to Kozmino on the Pacific and will increase the capacity of the entire pipeline to 1. As well as providing transit capacity for further expansion at Vankor. but received a much-needed boost from a US$10bn Chinese loan in February 2009.757km stage will link Taishet in the Irkutsk region to Skovorodino in the Amur region and has capacity of 600. The pipeline will run from the village of Purpe to the Samotlor oil field in the Khanty-Mansiysk region further south.000b/d from 2011. The pipeline system began operations in 2001 and reached its full design capacity in 2006. The first section of the pipeline had to be moved to 400km away from the ecologically sensitive Lake Baikal. The 430km Purpe-Samotlor pipeline will provide a better export route from crude volumes from the giant Vankor oil field and will speed up the development of other deposits in the Yamal and north-western Krasnoyarsk regions. The pipeline has experienced serious delays due to construction difficulties. Tagul and Russkoe field developments on the Yamal peninsula. Vladimir Putin officially inaugurated the Russian section of the ESPO pipeline spur from Skovorodino to the Chinese city of Daqing. where it will connect with the 927km Chinese section of the spur.000b/d in 2011-2030. The new link will cut about 100km from Vankor's route to ESPO trunkline. and will supply CNPC with 300. Until ESPO Phase 2 comes online. it will benefit TNK-BP's Suzun.

was completed in 1964 and currently has a capacity of around 1. The most advanced project is the offshore Shtokman field. Once the BPS-2 pipeline becomes operational. bypassing its traditional transit countries – Belarus. with Spain a likely buyer. The pipeline runs west to Unecha in Bryansk Province where it splits into two. which was involved in oil transit disputes with Russia in 2006 and 2010. one of Russia’s main oil export routes. Sakhalin-II. The project. which will supply pipeline gas to Europe and LNG to Europe and North America. close to the border with Belarus. The construction of the pipeline is expected to be completed in 2012 at a cost of around US$3. It has not yet been repaired.9bn. Poland and Ukraine. Shtokman LNG (Planned) © Business Monitor International Ltd Page 72 . A spur known as the Northern Druzhba continues north through Belarus and Lithuania where it formerly supplied the Novopolotsk and Orlen Lietuva (Mažeikių) refineries and the Ventspils and Butinge oil terminals.4mn b/d. with a capacity of up to 1mn b/d. The main Druzhba pipeline continues to Mozyr in Belarus. The 1. has estimated costs of US$30bn.016km-long BPS-2 pipeline will transport some 1mn b/d of oil from Unecha. The Russian section of the pipeline begins in the Republic of Tatarstan. to Ust-Luga and from there the crude will be transported on by tanker. The second major area for LNG is the Barents Sea and the Yamal-Nenets Autonomous Region. while Southern Druzhba leads into Ukraine and from there into central and south-eastern Europe.Russia Oil and Gas Competitive Intelligence Report 2010 system and bypass Belarus. which has been in dispute with Russia over energy imports several times. whose positions will be weakened as the new pipeline allows Russia to supply more oil directly to Western Europe. A consortium led by Norway’s Aker Solutions won the EUR25mn FEED contract for the floating production unit (FPU) at Shtokman in February 2009. which is being developed by Gazprom in partnership with French major Total and Norway’s Statoil. and the 1. The pipeline's construction was not welcomed by these transit countries. Russia is likely to reduce supplies through the Druzhba oil pipeline. The presence of a large number of transit countries has led to risks of disruption to supply. The Northern Druzhba pipeline was closed in 2006 when Russia claimed it had been damaged. came onstream in March 2009. Italy’s Technip is undertaking the FEED for the onshore gas facilities including the LNG plant. The construction of the new pipeline demonstrates Russia's strategy of diversifying its oil and gas export infrastructure.2mn b/d Southern Druzhba. particularly in Belarus. Druzhba The Druzhba pipeline. where it splits into the Western Druzhba. Some 70-80% of the LNG will be sold under long-term contracts. Western Druzhba crosses Poland and then runs into Germany. LNG Terminals Sakhalin-II Russia’s first LNG export terminal. which serves as a gathering point for oil from other regions and from Kazakhstan.

the company's CEO told Reuters in a July 8 interview. and an FID is due in 2011. the licence for which Alltech acquired in 2007. according to the report. The plant would commercialise gas reserves at the Kumzhinskoe and Korovinskoe fields in the Timan-Pechora Basin. Few details of the plan have been disclosed. though the facility is expected to have a liquefaction capacity of 6. France's Total has 25% and Gazprom the remaining 51%. which is expected to begin exporting gas by around 2018. stated in December 2009. © Business Monitor International Ltd Page 73 . Gazprom has previously said that it aims to start producing the first 15bcm of gas in Yamal by 2011 and then to gradually boost volumes to an ambitious 250bcm per year. which will be delivered by pipeline from eastern Russia. First gas is expected to be exported via pipeline to Europe in 2013. Although no firm project timetable has been set. It is as yet unclear where gas for the project will be sourced. Total announced in May 2010 that its plans for the development of the Shtokman natural gas field in the Barents Sea in Russia are on course. in which Norway's Statoil holds a 24% stake. The investment decision will be made in March 2011 and a decision on the gas liquefaction plans will be made by the end of the same year. Pechora LNG (Planned) Russian investment company Alltech Group is considering building an LNG export plant in the Nenets district. Shtokman is believed to be the biggest undeveloped offshore gas field in the world. an official agreement on construction of the plant is expected to be signed when Russian president Dmitry Medvedev attends the Asia-Pacific Economic Cooperation (APEC) summit in Tokyo in November. A number of IOCs as well as the government of Qatar have made overtures to Novatek about joining the Yamal LNG scheme. Gas produced in the third development phase of the Shtokman gas field will be exported solely as LNG.2tcm of gas reserves. Novatek and its minority partner Gazprom. while about half the gas produced at the field during phases one and two will be exported via pipelines and half as LNG.9bcm. according to a July 10 Nikkei report.Russia Oil and Gas Competitive Intelligence Report 2010 With an estimated 3. dubbed Pechora LNG. Vladivostock LNG (Planned) The Japanese and Russian governments have signed a preliminary agreement to build an LNG export terminal in Vladivostok. First deliveries could come as early as 2017. Increasing the proportion of gas that is exported in the form of LNG will provide more export options.6mn tpa and is expected onstream in Q415. have so far resisted bringing in such a partner. Novatek is the operator of the South (Yuzhno)-Tambeyskoe gas field onshore the Yamal-Nenets region. According to the Nikkei report. a JV between Gazprom and Novatek. Yamal LNG (Planned) Yamal LNG. The field is being developed by SDC. Through its controlling stake in the Yamal LNG operating vehicle. CH-Oil & Gaz. with LNG exports to follow in 2014. is the operator of the LNG project aiming to commercialise the Tambeyskoe group of fields. Alltech’s oil arm. would have an initial capacity of 2. however. The plant. Novatek is in no hurry to bring a foreign partner into the project.

South Stream Emboldened by Blue Stream’s success. however. which the EU is promoting in order to reduce dependence on Russia. A deal between Gazprom and Eni has been signed under which the two companies have agreed to double the pipeline's capacity to 63bcm. creating separate JVs between Gazprom and the countries’ gas distribution companies. Putin said Israel is now likely to be excluded from the Blue Stream II project. Slovenia joined the project later that year. It is the world's deepest underwater pipeline system and reaches a maximum depth of 2. © Business Monitor International Ltd Page 74 . and a southern route crossing the Balkan Peninsula to Italy. In Bulgaria. These JVs will be responsible for the design. Austria now remains the last country on South Stream's preliminary route yet to sign up for the project. Lebanon. Blue Stream is a JV between Gazprom and Italy’s Eni. In February 2006. The 385km subsea sections of the pipelines run from the Beregovaya compressor station in Russia to a gas terminal outside the Turkish port of Samsun. The northern route passes through the same countries as the 30bcm Nabucco pipeline from Turkey to Austria.4bn system consists of two pipelines that run for 1. making an extension of the pipeline to Israel unnecessary. Italy and Russia met in May 2009 to sign transit agreements for South Stream. There has since been much talk of expanding the pipeline both geographically and in terms of capacity. Turkish energy ministry officials claimed that talks were under way between Gazprom and Turkish state-run gas distributor Botaş about extending the pipeline through Turkey to Syria. since when they have been gradually ramped up to their maximum capacity of 16bcm per annum. Putin said that gas discoveries in recent years in Israel have reduced the country's future gas import projections.213km from southern Russia to Ankara in Turkey. The 900km South Stream pipeline is routed via the Black Sea to south-eastern Europe. The pipelines were completed in 2004 and were officially inaugurated in 2005. while Turkey agreed to let the pipeline pass under its territorial waters in return for a transit fee in August 2009. construction and operation of the pipeline within their respective territories. Speaking during an official visit to Turkey in June 2010. the pipeline will split into a northern route going to Austria via Romania and Hungary. Israel and Cyprus in a project known as Blue Stream II. in November 2007 Gazprom and Eni agreed to construct a new trans-European gas pipeline that will cost the companies EUR10bn by the time it comes onstream in 2013/14. which carries gas directly to Turkey under the Black Sea.Russia Oil and Gas Competitive Intelligence Report 2010 Gas Pipelines Blue Stream Russia’s first post-Soviet westbound pipeline system is Blue Stream. The US$3. Greece. Government officials of Bulgaria.150m below the surface of the Black Sea. including branches to Italy and the Middle East.

technical obstacles and political objections from neighbouring states. EdF can buy as much as 6bcm per year. The undersea construction is now set to begin on April 1 2010. however. Petersburg International Economic Forum in June. the head of foreign projects at Russia's state-run Gazprom. He also said that following the signing of agreements with the Austrian government and oil company OMV on April 24. The project is 51% owned by Gazprom along with German partners E.Russia Oil and Gas Competitive Intelligence Report 2010 The South Stream was originally a 50:50 JV between Gazprom and Eni. there were now no expectations of further delays to the project. Putin. Construction of the onshore segment began in 2005 and was completed by early-2010. The project. At its start-up in 2011. Two potential gas pipeline options between Russia and South Korea are on the table: an overland pipeline via North Korea and a direct undersea pipeline. Gazprom and Eni during the St. Gazprom and Eni. The second 27. state-run Korea Gas (Kogas) announced its intention to team up with Gazprom to build an undersea gas pipeline from Russia if plans for an overland transit through North Korea fail. GDF Suez is expected to receive 4. The decision was announced following discussions between Vladimir Putin and his Italian counterpart Silvio Berlusconi on April 26. 20% stake. but France’s EdF signed an MoU to take a 10% stake in November 2009. In November 2008. made major breakthroughs in late-2009. told industry data provider Platts in April 2010. Russia-South Korea Gas Interconnector South Korea and Russia are expected to begin a new round of talks on a gas interconnector between the countries. who declared the granting of a 20% stake to EdF. The 20% stake is to be taken equally from the two existing South Stream project partners. while construction of the underwater segment stalled owing to ongoing environmental concerns.5bcm. added that a partnership deal would be signed between EdF. under a letter of intent (LoI) signed in March 2010. each with 20%. The 1. In April 2010. and later Dutch entrant Gasunie with 9%. Putin confirmed that the main terms for the admission of EdF to the project had been completed and that South Stream was on course for start-up in H215. After more than a year of negotiations. Nord Stream Russia’s second major export pipeline project is Nord Stream.5bcm phase is planned to come onstream in 2012. in the pipeline project.5% each from Nord Stream's two German partners. Stanislav Tsygankov. French energy group GDF Suez signalled its intention to participate in Nord Stream as a minority partner. Finland and Denmark. Under the agreement. rising costs. the partners are hoping to take a FID on the project in 2010. according to a report by The Moscow Times. the pipeline will have a capacity of 27. Following the finalisation of the contracts. The first option suffers from severe geopolitical risks while the second option presents formidable technological and financial challenges. With the erratic Pyongyang government under Kim Jong-il announcing periodically that it will © Business Monitor International Ltd Page 75 .ON Ruhrgas and Wintershall.200km pipeline is designed to carry an eventual 55bcm annually under the Baltic Sea from Vyborg to Greifswald in Germany. securing final approvals from transit states Sweden. In December 2008. EdF was awarded a larger.

the latter option seems unfeasible. despite the north's opportunity to earn up to US$100mn a year in transit fees. © Business Monitor International Ltd Page 76 .Russia Oil and Gas Competitive Intelligence Report 2010 end all political and military agreements with Seoul.

the worst-case scenario of a reversal of the 1990s privatisations appears unlikely. Weaknesses Opportunities Threats © Business Monitor International Ltd Page 77 . the benefits of its immense natural resources wealth and large and rapidly growing domestic market are significant incentives for potential foreign direct investors. State influence over business is on the rise. Nevertheless. Given very low confidence in the domestic banking industry. Despite Russia's poor investment image in the West.Russia Oil and Gas Competitive Intelligence Report 2010 SWOT Analysis Russia Business Environment SWOT Strengths The post-1998-crisis economic rebound. The government has made fighting corruption a key priority and we expect sweeping legislative changes to significantly enhance the capacity of corruption fighting institutions in the medium term. the central bank's efforts to restructure the sector could destabilise it further. high levels of bureaucracy and corruption. Most recently. The operating environment remains hazardous on a number of fronts. combined with significant reductions in personal and corporate income tax rates. foreign operators in the energy sector have come under pressure to allow state-owned firms greater involvement in their projects. with many foreign investors put off by poor legal safeguards. has made Russia a much more attractive place to do business. and the Kremlin's apparently politically motivated campaign against foreign oil firms.

Composite Scores Composite Business Environment scores are calculated using the average of individual Upstream and Downstream ratings. an isolated example. © Business Monitor International Ltd Page 78 . The range for forecast gas consumption growth is from 10% to 81%. although Russian tax tweaks. Gas output is forecast to fall by 18% in Romania. taking first and second places with respective scores of 63 and 61 points out of a possible 100. but rise 55% in Azerbaijan. Oil production growth for the period to 2014 ranges from a negative 27% for Croatia to a positive 56% in Turkmenistan. depending partly on market maturity and EU membership. Turkey. including the new EU member states. Kazakhstan's moves to take a bigger share of the Kashagan project and to modify licensing laws are. Kazakhstan and Azerbaijan continue to dominate the top of the regional league table. but should be able to stay in front of Slovenia and Uzbekistan. There has been widespread privatisation progress in the EU states. The political and economic environment varies. and is arguably increasing in both Russia and Kazakhstan. Slovakia and Croatia are struggling near the foot of the table. Russia now shares third place with Poland. but far less movement in the other key states. is a challenger for Poland's position. included for the first time. State influence remains very high. The points spread in the CEE region is considerably narrower than elsewhere. we hope. while oil demand growth ranges from 6% to 31% across the region. but with no immediate chance of catching the two main Central Asian energy powerhouse states. while Romania and Ukraine are closely matched just above the middle of the league table. Slovenia and Uzbekistan now share the final place in the rankings. environmental claims and attempted asset re-nationalisation have undermined its already unattractive licensing and regulatory regime. Russia and the four leading Central Asian hydrocarbons producers. with a composite upstream and downstream score of 43 points out of the 100 available. ahead of Hungary and the Czech Republic with limited upstream resource potential. with the lowest-ranked country having 68% of the score allocated to the highest-ranked.Russia Oil and Gas Competitive Intelligence Report 2010 Risk-Reward Ratings Business Environment Ratings Central/Eastern Europe Region The CEE region comprises 15 countries.

Russia Oil and Gas Competitive Intelligence Report 2010 Table: Regional Composite Business Environment Rating Upstream Rating Kazakhstan Azerbaijan Poland Russia Turkey Romania Ukraine Czech Republic Hungary Bulgaria Turkmenistan Croatia Slovakia Uzbekistan Slovenia 73 70 56 53 53 51 44 46 46 56 46 46 45 46 41 Downstream Rating 53 52 58 60 59 53 57 53 49 36 44 43 42 41 44 Composite Rating 63 61 57 57 56 52 51 49 48 46 45 45 44 43 43 Rank 1 2 3= 3= 5 6 7 8 9 10 11= 11= 13 14= 14= Source: BMI. Scores are out of 100 for all categories. with 100 the highest. © Business Monitor International Ltd Page 79 .

The 'Risks' rating comprises Market Risks and Country Risk. which have a 65% and 35% weighting respectively and are based on a subjective evaluation of licensing terms and liberalisation (Market) and the industry's broader Country Risk exposure (Country). having caught up with Croatia and Hungary to share eighth place. showing that the overall pecking order is somewhat different from that for combined scores. They are based upon the oil and gas resource base/growth outlook and sector maturity (Upstream) and the broader industry competitive environment (Country). Ukraine has the potential to challenge Slovakia for 13th place. subject to an improved country risk and licensing/regulatory environment. ahead of Turkey and Russia in joint fifth place. Scores are out of 100 for all categories. Russia should be able to move higher. The Upstream BE Rating is the principal rating. The ratings structure is aligned across the 14 Industries for which BMI provides Business Environment Ratings methodology. In turn. Table: Regional Upstream Business Environment Rating Limits of Potential Returns Upstream Market Kazakhstan Azerbaijan Bulgaria Poland Turkey Russia Romania Hungary Croatia Turkmenistan Uzbekistan Czech Republic Slovakia Ukraine Slovenia 80 69 61 38 41 71 43 24 29 71 43 28 24 43 28 Country Structure 75 85 50 80 65 30 55 80 55 45 40 70 70 50 60 Limits 79 73 58 48 47 61 46 38 35 65 42 38 35 44 36 Risks to the Realisation of Potential Returns Country Risk 47 42 64 72 61 43 60 74 70 30 27 78 74 42 81 Risks 59 63 52 74 67 35 63 65 70 37 39 63 68 44 54 Upstream Rating 73 70 56 56 53 53 51 46 46 46 46 46 45 44 41 Rank 1 2 3= 3= 5= 5= 7 8= 8= 8= 8= 8= 13 14 15 Industry Risks 65 75 45 75 70 30 65 60 70 40 45 55 65 45 40 Source: BMI. It comprises two sub-ratings 'Limits of Potential Returns' and 'Risks to Realisation of Returns'. Bulgaria and Poland are tied in third place. the 'Limits' Rating comprises Power Sector and Country Structure. Long term. with 100 the highest. For a list of the data/indicators used. which have a 75% and 25% weighting respectively. © Business Monitor International Ltd Page 80 . with the choice depending on their exposure to the industry in each particular state. and should be able to keep clear of bottom-ranked Slovenia. Turkmenistan's hydrocarbons resources mean it has shifted further from the foot of the table. please consult the appendix. itself having a very useful 14-point lead over Bulgaria. Azerbaijan is second.Russia Oil and Gas Competitive Intelligence Report 2010 Upstream Scores Kazakhstan and Slovenia are the best and worst performers in this segment. which is based on BMI's proprietary Country Risk Ratings. Uzbekistan has also mounted a successful challenge for mid-table status. which have a 70% and 30% weighting respectively. and is designed to enable clients to consider each rating individually or as a composite.

Country Structure: Influencing Russia's fourth-highest position in the Limits to Potential Returns section is its unenviable country structure. privatisation and country risk factors are less impressive. Russia Upstream Rating -.Russia Oil and Gas Competitive Intelligence Report 2010 Russia Upstream Rating -. while corruption is a key risk for private companies. Its oil and gas reserves account for much of the upstream score. score is for long-term policy continuity. © Business Monitor International Ltd Page 81 . fifthranked oil production growth outlook and gas reserves to production ratio (RPR). aided by unrivalled hydrocarbons resources.Risks To Potential Returns Industry Risks: Russia is ranked last. their ability to operate is weakened by the country's rule of law. The state has greater ownership of upstream assets than elsewhere in the region -. alongside Turkmenistan. Its last position for Industry Risks is attributable to a poor licensing environment. behind even Turkmenistan. behind even Uzbekistan. in the Risks to Realisation of Potential Returns section of our ratings. Physical infrastructure barely matches the regional average.Overview Russia has a share of fifth place with Turkey in BMI's updated Upstream Business Environment Ratings. but licensing. Furthermore.Potential Returns Upstream Market: On the basis of upstream data alone. This reflects the highest-placed oil and gas reserves. The best. which takes last place.and the industry features relatively few non-state concerns. Russia Upstream Rating -. Country Risks: Russia's broader country risk environment is unexceptional and ranked 11th behind Kazakhstan. and limited near-term privatisation prospects. Russia is the joint second most attractive state in the CEE region. Medium-term scope exists for Russia to challenge Bulgaria and Poland above it. although the major Caspian states are likely to remain out of reach. and only respectable.

Turkmenistan is now on the same score as Slovenia and there is little to choose between Croatia. Turkey's risk profile is substantially better and it may be able to challenge for regional leadership over the medium term. the 'Limits' Rating comprises Power Sector and Country Structure. with 100 the highest. with the choice depending on their exposure to the industry in each particular state. © Business Monitor International Ltd Page 82 . Slovakia and Uzbekistan near the foot of the table. in spite of the size of its fuels market and refining capacity. For a list of the data/indicators used. Scores are out of 100 for all categories. which have a 70% and 30% weighting respectively. The 'Risks' rating comprises Market Risks and Country Risk. Poland is just a point further back and also a potential regional leader. but is unlikely to challenge it during the next few quarters. In turn. Table: Regional Downstream Business Environment Rating Limits of Potential Returns Downstrea m Market Russia Turkey Poland Ukraine Czech Republic Kazakhstan Romania Azerbaijan Hungary Turkmenistan Slovenia Croatia Slovakia Uzbekistan Bulgaria 71 49 40 57 33 67 47 61 32 51 26 36 24 41 23 Country Structure 72 74 80 60 56 46 56 50 44 26 38 38 40 34 42 Limits 71 55 50 58 39 62 49 58 35 45 29 36 28 39 28 Risks to the Realisation of Potential Returns Country Risk 54 51 61 45 62 50 48 59 62 48 70 54 58 53 48 Risks 34 69 75 57 85 32 61 39 82 43 79 60 74 45 55 Downstrea m Rating 60 59 58 57 53 53 53 52 49 44 44 43 42 41 36 Rank 1 2 3 4 5= 5= 5= 8 9 10= 10= 12 13 14 15 Industry Risks 20 80 85 65 100 20 70 25 95 40 85 65 85 40 60 Source: BMI. having edged ahead of Azerbaijan. which have a 75% and 25% weighting respectively. They are based upon the downstream refining capacity/product growth outlook/import dependence (Downstream) and the broader socio-demographic and economic context (Country). The Downstream BE Rating is the principal rating. please consult the appendix. which is based on BMI's proprietary Country Risk Ratings. Kazakhstan. with Russia now challenged by second-placed Turkey.Russia Oil and Gas Competitive Intelligence Report 2010 Downstream Scores Russia and Bulgaria now bracket the 13 other CEE states in the downstream rankings. Ukraine is now just one point behind Poland. and is designed to enable clients to consider each rating individually or as a composite. which have a 60% and 40% weighting respectively and are based on a subjective evaluation of regulation and liberalisation (Market) and the industry's broader Country Risk exposure (Country). The ratings structure is aligned across the 14 Industries for with BMI provides Business Environment Ratings methodology. the Czech Republic and Romania are squabbling over fifth place. It comprises two sub-ratings 'Limits of Potential Returns' and 'Risks to Realisation of Returns'.

Country Risks: Its broader country risk environment is ranked equal seventh alongside Croatia. © Business Monitor International Ltd Page 83 . There is still considerable state ownership of downstream assets. and third-ranked refining capacity growth potential. population and nominal GDP. There are excellent scores for refining capacity. behind Turkey. Russia ranks first among the region's 15 countries. Russia Downstream Rating -. above Kazakhstan. Population and nominal GDP rank first. ahead comfortably of Turkey and Poland.Potential Returns Downstream Market: On the basis of downstream data alone. There are a few particularly high scores. This is attributable to the country's first-placed refining capacity and oil/gas demand. The scores for rule of law and legal framework let the country down badly.Russia Oil and Gas Competitive Intelligence Report 2010 Russia Downstream Rating -. short-term economic growth risk and short-term policy continuity. and the downstream industry is only moderately competitive. Growth in GDP per capita is the second-highest for the entire region. Operational risks for private companies are reduced by the state's high scores for short-term economic external risk. oil and gas demand.Overview Russia is at the top of the league table in BMI's updated Downstream Business Environment Ratings. and it fares little better in terms of physical infrastructure. Russia is ranked second from last. Russia Downstream Rating -. Country Structure: Russia ranks first in terms of the Limits to Potential Returns section. ahead only of Kazakhstan. Its joint lowest score with Kazakhstan for Industry Risks reflects the harsh regulatory regime and stagnant privatisation trend.Risks To Potential Returns Industry Risks: In the Risks to Realisation of Potential Returns section of our ratings. and its Country Structure has third place in the region. but there is some risk from Turkey over the longer term.

inDustry clAssificAtion Alstom 18 Schipok Street Building 2 Moscow 115093 Russia Tel: +7 (495) 231 2949 Fax: +7 (495) 231 2945 Email: info@power.alfagroup.com Key presonnel Consultancy Telecoms/Communications Banking/Finance Oil & Gas Aviation/Defence nAtionAlity/trADe AfiliAtion USA Subsidiary of AT Kearney Inc.ru Website: www. Ukraine and other CIS countries. The company also has representative offices in Krasnodar. Building 1. commercial and investment banking.ru Key presonnel President: Mr Musa Bazhaev Vice President: Mr Igor Sarajev Vice President . inDustry clAssificAtion Established: 1993 Business Activity Argus Limited (Russia) supplies pipeline construction equipment and electronics repair equipment.bjservices.Russia Oil & Gas Competitive Intelligence Report 2010 Business Development Directory Alfa Group 11 Bolshoyk Savinskiy Office 351 Moscow 119435 Russia Tel: +7 (495) 787 0077 Fax: +7 (495) 792 5235 Email: info@ctf. Corporate Development & Control Director: Mr Nigel Robinson Corporate Relations Manager: Ms Natalia Dymova General Management locAl stAtistics Established: 1989 President: Mr Michael Rae Vice President: Mr Dmitry Kanevskey General Director: Mr Anton Rae Operations Director: Mr David Lax Commercial & Marketing Director: Mr Vlad Kurbatov Head of Sales: Mr Konstantin Lyubimov locAl stAtistics Business Activity Alfa Group Consortium (Russia) is one of the country’s largest privately owned financial-industrial conglomerates. insurance.Finance: Mr Dmitry Markov Corporation Director: Mr Sergey Bakov locAl stAtistics Established: n/a Oil & Gas Energy/Utilities Russia Managing Director: Mr Ruslan Korzh General Manager: Mr Alla Khaitova Head of Technical: Mr Dmitry Klur Pavlov Finance Manager: Mr Vladimir Berezhnov Marketing Manager: Miss Irna Kuzminykh locAl stAtistics inDustry clAssificAtion Established: 1992 nAtionAlity/trADe AfiliAtion Business Activity AT Kearney (Russia) provides strategic consulting services in Russia. Office 403 Moscow 119435 Russia Tel: +7 (495) 937 9828 Fax: +7 (495) 933 3635 Website: www. USA © Business Monitor International Ltd Page 84 . inDustry clAssificAtion Services Oil & Gas France Subsidiary of Alstom.ru Website: www.alstom.ru Key presonnel Argus ltd 9 Skakovaya Street. inDustry clAssificAtion Electronics/Electrical Manufacturing Oil & Gas Energy/Utilities Electric Distribution/Transport/Transmission Power Generation nAtionAlity/trADe AfiliAtion Finance Controller: Mr Ronald Pinto Country Manager: Mr Brent Robert Davies Business Development Manager: Mr Ryan Elder locAl stAtistics Established: n/a Business Activity BJ Services Company (Russia) provides pumping services to oil and gas firms.Tirogovskaya Street House 18.Russia: Mr Patrick Tascal Finance Director: Mr Vincent Lery Administration Officer: Mrs Galina Nikitina Head of Information Technology: Mr Victor Nikitiuk Human Resources Manager: Ms Larisa Sukhorukikh locAl stAtistics Established: 1980 Business Activity Alstom (Russia) has manufacturing facilities in Moscow and specialises in design and engineering of gas turbines and their components as well as in the full-cycle production of gas turbine blades and other components. commodities trading. 52/1 Riverside Towers Moscow 115054 Russia Tel: +7 (495) 258 5019 Fax: +7 (495) 258 5016 Email: info@atkearney. France nAtionAlity/trADe AfiliAtion USA Subsidiary of BJ Services Company USA. 4/F. Almaty and Ashkhabad. USA BJ services company M.ga.atkearney.ru Website: www. USA Alians Group 39 Sivtsev Vrajek Per Moscow 119002 Russia Tel: +7 (495) 745 5656 Fax: +7 (495) 745 5658 Email: ga@ga. 4/F Moscow 125040 Russia Tel: +7 (495) 741 4817 Fax: +7 (495) 741 4818 Email: argcis@arguslimited.com Website: www. Baku.arguslimited.ru Key presonnel At Kearney Kosmodamianskaya Naberezhnaya.alstom. with interests in the oil and gas.com Key presonnel President .com Website: www.com Key presonnel CIO: Mr Pavel Pestrikkov Group Portfolio Management & Control Director: Mr Vladimir Ashurkov Finance. inDustry clAssificAtion Oil & Gas Banking/Finance Telecoms/Communications Insurance Russia Machinery/Equipment Construction/Engineering Oil & Gas nAtionAlity/trADe AfiliAtion nAtionAlity/trADe AfiliAtion USA Representative Office for Argus Limited USA. retail trade and telecommunications sectors.

inDustry clAssificAtion Machinery/Equipment Oil & Gas Mining USA ConocoPhillips (Russia) carries out upstream operations and business development. a 400 kilometre gas pipeline from the Russian to Turkish coasts on the Black Sea and a compressor station in Dzubga.chevronlubricants. ConocoPhillips and Arkhangelskgeoldobycha (AGD) signed a joint venture agreement. Rosshelf.conocophillips. In December 1996. Usinks. In December 1991. Gazflot. Industry Classification Oil & Gas Exploration/Extraction Machinery/Equipment nAtionAlity/trADe AfiliAtion Executive Director: Mr Konstantin Schilin Finance Director: Mr Craig Miller Office Manager: Mrs Ludmila Mokrousova General Management Marketing Manager: Mrs Anna Dubovskaya Human Resources Manager: Mrs Varvara Nesterova Head of Information Technology: Mr Vladimir Ivakh Business Development . Russia. Yukos and Sidanco. Halliburton International has offices in Moscow. Halliburton KBR. the governments of Russia and Kazakhstan signed the CPC Restructuring Agreement. USA chevron lubricants cis 7 Gasheka Street Moscow 123056 Russia Tel: +7 (495) 544 5556 Fax: +7 (495) 544 5557 Website: www. Industry Classification Chemicals Petrochemicals Oil & Gas Exploration Manufacture Oil/Petroleum Exploration/Extraction Recycling/Treatment nAtionAlity/trADe AfiliAtion nAtionAlity/trADe AfiliAtion USA United Kingdom Subsidiary of ConocoPhillips. transportation and sale of hydrocarbons. Chevron is the largest private shareholder in the CPC. Noyabrsk. USA Eni SpA (Russia) specialises in the exploration and production of natural gas. 4 dom 2 Moscow 127051 Russia Tel: +7 (495) 258 2700 Fax: +7 (495) 258 2727 Email: atsm@chevron. is an international technology-based engineering and construction firm. which was established in the early 1990s by the governments of the Russian Federation.1 Moscow 105005 Russia Tel: +7 (495) 232 1002 Fax: +7 (495) 232 1003 Email: info@cetco. Fortum (formerly Neste). with a special focus on natural gas. Surgutneftegas. inDustry clAssificAtion conocophillips Gasheka Sreet 6 Office 1300 Moscow 125047 Russia Services Oil & Gas Trade nAtionAlity/trADe AfiliAtion USA Subsidiary of Halliburton Group of Companies. Norsk Hydro (Norway) and Total (France). redistributing 50% of CPC’s equity shares among several private international petroleum companies. Nefteyugansk. The joint venture has also been studying a number of oil fields north of the Timan Pechora Province.cetco. 18/F Moscow 125445 Russia Tel: +7 (495) 755 8300 Fax: +7 (495) 755 8301 Website: www. Tatneft. Nizhnevartovsk. LUKOIL.it Key presonnel Sales Director: Mr Ian Bennett Finance Manager: Ms Elena Kotliar Head of Legal: Miss Galina Glazkova Human Resources Manager: Mrs Anastasia Kristova Supply Chain Manager: Miss Elena Kutareva locAl stAtistics Head of Representative Office: Mr Ernesto Ferlenghi locAl stAtistics Established: 1950 Business Activity Established: n/a Petrochemicals Oil & Gas Chemicals inDustry clAssificAtion nAtionAlity/trADe AfiliAtion USA Subsidiary of Chevron Corporation. With a 15% equity stake.eni.com Key presonnel eni spA Levshinskij B per.Account Leader: Mrs Victoria Duneva Marketing locAl stAtistics Established: n/a No of Employees: 850 Business Activity USA Russia Subsidiary of Chevron Corporation. USA Halliburton (Russia) provides services to the oil and gas industries.com Website: www. In February 1999. mining and airport equipment manufacturers.halliburton. In 1998. The pipeline has a capacity of approximately 16 billion cubic metres of gas per year. Gazprom and Eni signed an agreement for the joint participation in the Blue Stream Project. Kharyaga and Yuzhno-Sakhalinsk. p.Russia Oil & Gas Competitive Intelligence Report 2010 capital equipment and technology corp (cetco) Messengers lane. Eni and Gazprom signed a 50/50 strategic alliance agreement for the exploration. Its sister company. 5.com Key presonnel President & General Manager: Mr Darrell Cordry Marketing Manager: Ms Sabina Abudaeva locAl stAtistics Established: 1991 Business Activity Chevron Neftegaz Inc (Russia) is one of the largest investors in the Russian oil and gas infrastructure through its investment in the CPC.ru Key presonnel Tel: +7 (495) 785 2800 Fax: +7 (495) 785 2804 Website: www. including Gazprom. Building 1 Moscow 119034 Russia Tel: +7 (495) 916 5353 Fax: +7 (495) 916 5351 Website: www. The company’s clients have included regional and national companies.com Key presonnel President: Mr Don Wallette Business Development Manager: Ms Mariana Barabanova Sales Manager: Mr Anton Mirov locAl stAtistics Established: 1992 Business Activity CEO: Mr Alexander Chudnovets Senior Management Finance Manager: Mr Aleksandr Gyzenko Head of Human Resources: Mrs Kate Tverdoxleb locAl stAtistics Established: n/a No of Employees: 50 Business Activity CETCO (Russia) represents a number of Western oilfield. which established the Polar Lights Company. USA Hydro Aluminium cis As PO Box 161 © Business Monitor International Ltd Page 85 .ru Website: www. 24d Meridian Commercial Centre.. Italy Halliburton international Smolnaya ul. ConocoPhillips is also a participant in the Shtokman Gas Condensate field in partnership with Gazprom.chevron.com Key presonnel Italy Representative Office for Eni SpA. development. Industry Classification Oil & Gas nAtionAlity/trADe AfiliAtion chevron neftegaz inc Rakhmanovsky Pereulok. d.. the Republic of Kazakhstan and the Sultanate of Oman.

ru Key presonnel iterA Group Sevastopolsky Prospekt. inDustry clAssificAtion Machinery/Equipment Oil & Gas Russia Canada Oil & Gas Trade/Supply/Distribution Finland nAtionAlity/trADe AfiliAtion nAtionAlity/trADe AfiliAtion integra Group 6 Prospect Vernadskogo Moscow 119311 Russia Tel: +7 (495) 933 0621 Fax: +7 (495) 933 0622 Email: integra.Commercial: Mr Gennady Nikolaevich Skidanov Executive Vice President: Mrs Raissa Mikhailovna Frenkel General Director: Mr Vladimir Makeyev locAl stAtistics Integra Group is a leading Russian independent provider of onshore oilfield services and a leading manufacturer in Russian of drilling rigs with heavy lifting capacity.ru Website: www.iteragroup. © Business Monitor International Ltd Page 86 . Building 1 Building 1 Moscow 117209 Russia Tel: +7 (495) 411 8500 Fax: +7 (495) 411 8502 Email: inbox@itera. Investments include nickel and gold producer MMC Norilsk Nickel. 28. in preparation for the extraction of oil and gas.7 Moscow 119048 Russia Tel: +7 (495) 244 4406 Fax: +7 (495) 244 3251 Website: www.iksoil.ru Key presonnel Hydro Aluminium CIS AS (Russia) specialises in aluminium. Office 7 Nabierezhnaya Dom 7 Dierbienievskaya Moscow 115114 Russia Tel: +7 (495) 234 5942 Fax: +7 (495) 234 5944 Email: info@x-oil.interros. United Kingdom intari Beringa ul. which accounts for 80% of the group’s sales.com Website: www. the Interros-Dostoinstvo private pension fund.info@integra. It has oilfield services operations in all major oil and gas producing regions in Russia and in many other CIS countries. inDustry clAssificAtion Business Activity Inuctan Oy (Russia) is a subsidiary of Autotank (Finland). and a 27. workover. Integra Group has become one of the leading companies in the oilfield services and equipment manufacturing sectors of the Russian market. Baltic States.com Key presonnel General Director: Mr Igor Voronov locAl stAtistics Established: 2004 No of Employees: 22000 Business Activity Vice Chairman: Mr Valery Otchertsov President: Mr Igor Viktorovich Makarov General Management Vice President . Norway iks-oil ltd Strojenie 14. Netherlands and Switzerland. media group Prof-Media News and Publishing Holding. inDustry clAssificAtion Managing Director: Mr Alexander Zasypkin Sales Manager: Mr Alexander Kolesnikov locAl stAtistics Established: n/a Oil & Gas inDustry clAssificAtion nAtionAlity/trADe AfiliAtion Oil & Gas Mining Banking/Finance Machinery/Equipment Insurance Media Russia nAtionAlity/trADe AfiliAtion Russia United Kingdom Distributor for BP plc. private banking group Rosbank. 1.hydro. The company is also the largest independent gas producer in Russia. Established: 1992 No of Employees: 8000 Business Activity ITERA Group (Russia) produces. Through 16 strategic acquisitions.. transports and markets natural gas. Integra Group operates in the drilling.ru Website: Key presonnel Chief Representative: Mr Nikita Nikonov locAl stAtistics Established: n/a Business Activity Established: n/a Intari (Russia) develops ice and marine technology. power machine producer Silovye Mashiny. chemicals and other sectors in Russia. The firm provides oil companies and their service stations with fuel sales solutions. metal.com locAl stAtistics inDustry clAssificAtion Oil & Gas Manufacturing Machinery/Equipment Russia nAtionAlity/trADe AfiliAtion Established: 1992 Business Activity interros 9 Bolshaya Yakimanka Street Moscow 119180 Russia Tel: +7 (495) 785 6363 Fax: +7 (495) 726 5754 Email: info@interros. fertilisers. d. inDustry clAssificAtion Chemicals Petrochemicals Manufacturing Oil & Gas Agrochemicals nAtionAlity/trADe AfiliAtion Norway Subsidiary of Hydro Aluminium AS.ru Website: www. seismic and geophysics sectors and manufactures oilfield services equipment. Korpus 1.ru Website: www. Street 2 Helsinki House Moscow 119121 Russia Tel: +7 (495) 937 3563 Fax: +7 (495) 248 1471 Email: inuctan@space. development and production of oil and gas.intari.ru Key presonnel President: Mr Valadimir Potanin CEO: Mr Sergey Barbashev Deputy CEO: Mr Guerman Aliev CFO: Mr Alexander Polevoy Managing Director: Mr Andrei Bougrov Managing Director . the USA. construction. the CIS. agriculture and food processing venture APK Agros. The company manufactures primary aluminium and rolled products.Investments: Mr Dmitry Kostoyev locAl stAtistics Established: n/a No of Employees: 190000 Business Activity Interros (Russia) is among the country’s largest private investment companies. the Soglasie insurance group.ru Website: www. d.5% stake in oil and gas exploration group RUSIA Petroleum. operating a number of gas fields in the Yamalo-Nenetz Autonomous Region. Products include integrated geographical systems Canadian company Enfotec for the exploration of the Arctic ocean. cementing equipment and specialised equipment used in the exploration. 38 St Petersburg 199397 Russia Tel: +7 (812) 352 0743 Fax: +7 (812) 325 3757 Email: sar@intari.com locAl stAtistics inuctan oy 4th Rostovskiy per.Russia Oil & Gas Competitive Intelligence Report 2010 Usachova Street 33 . oil and gas.integragroup. The ITERA group of companies comprises 130 companies engaged in the energy.

inDustry clAssificAtion nAtionAlity/trADe AfiliAtion Japan Subsidiary of Mitsubishi Corporation. 52 Moscow 115054 Oil & Gas Chemicals LPG Lubes Petrochemicals nAtionAlity/trADe AfiliAtion Netherlands United Kingdom Subsidiary of Royal Dutch Shell plc.petroal. Head of the Main Division of General Affairs: Mr Anatoly Barkov Vice-President.ru Key presonnel Established: 1993 No of Employees: 150000 Business Activity LUKOIL Oil Company (Russia) holds over 19. Marketing & Distribution: Mr Vladimir Nekrasov Vice-President. Head of the Main Technical Division: Mr Dzhevan Cheloyants Vice-President. Internationally the company has refining assets in the Ukraine. This was in co-operation with The Kansai Electric Power Inc (Japan).hu Website: www.lukoil. inDustry clAssificAtion General Manager: Mr Yacek Dziembaj locAl stAtistics Energy/Utilities Services Oil & Gas Chemicals Petrochemicals Established: n/a Business Activity Shell East Europe Company Ltd (Russia) sells oil products and chemicals.Refining. Estonia. USA russian petroleum investor (rpi) Entrance 3.mitsubishicorp. 24 12/F.hu Key presonnel nAtionAlity/trADe AfiliAtion luKoil company 11 Sretensky Boulevard Moscow 101000 Russia Tel: +7 (495) 627 4444 Fax: +7 (612) 5535 8578 Email: webmaster@lukoil. located in a Moscow suburb. Japan Mol-russ Bulding 3. and information management and IT-related services to both Russian and international oil and gas operators.mol. Belarus.Exploration & Production: Mr Ravil Maganov General Management Head of Main Division . inDustry clAssificAtion Manufacturing Oil & Gas Natural Gas Oil/Petroleum Distribution/Transport/Transmission Exploration/Extraction Refining/Processing Suppliers nAtionAlity/trADe AfiliAtion Oil & Gas Machinery/Equipment nAtionAlity/trADe AfiliAtion Russia Affiliated with Schlumberger Ltd. directional drilling. Head of Strategic Development & Investment Analysis: Mr Leonid Fedun Vice-President. Romania. Meridian Business Center Moscow 125445 Russia Tel: +7 (495) 258 6900 Fax: +7 (501) 258 6920 Website: www. Ukraine. pumping.com Key presonnel Established: 1968 Business Activity Mitsubishi Corporation (Russia) provides services to the energy sector. inDustry clAssificAtion Finance Director: Miss Marina Solovyeva Human Resources Manager: Mrs Anna Ermilova Chief Accountant: Mrs Irina Dorina Head of Information Technology: Mr Arkady Kochurov locAl stAtistics Established: 1995 Business Activity PetroAlliance Services Company Limited (Russia) provides seismic. 9/F Kosmodamianskaya Naberezhnaya. Netherlands © Business Monitor International Ltd Page 87 . Poland.Finance.shell.com Key presonnel Established: n/a Oil & Gas Services USA inDustry clAssificAtion Finance Director: Mr Akira Oida Administration Director: Mr Nishigori Taku General Manager: Mr Nakavato Makoto Head of Chemicals: Mr Tsukui Manabu Head of Information Technology: Mr Vladimir Aimetinov Human Resources Manager: Mrs Ekaterina Mihesilova locAl stAtistics nAtionAlity/trADe AfiliAtion shell east europe company ltd ul Smolnaya. integrated project management. with smaller reserves in European Russia. Latvia. Turkey. Economics & Planning: Mr Sergei Kukura Finance First Vice President . wireline logging and perforating.com Key presonnel General Manager: Mr Gabor Gyulai Office Manager: Ms Maria Tatarnikova Finance Manager: Ms Laura Babaeva Head of Human Resources: Miss Anna Belyaeva Head of Information Technology: Mr Eugene Prokoshev locAl stAtistics Established: n/a Oil & Gas inDustry clAssificAtion nAtionAlity/trADe AfiliAtion Hungary Subsidiary of MOL Magyar Olaj. Bulgaria.com Website: www. Romania. Kazakhstan and Kyrgyzstan.Human Resources: Mr Anatoly Moskalenko First Vice President . Hungary President: Mr Vagit Alekperov General Management First Vice President . 7 Building 2 Sagovnichskaya Moscow 115035 Russia Tel: +7 (495) 961 2122 Fax: +7 (495) 961 2127 Website: www. Office 1403-A 12 Krasnopresnenskaya Naberezhnaya Moscow 123610 Russia Tel: +7 (495) 778 4597 Fax: +7 (495) 778 9332 Email: moscow@rpi-inc.rpi-inc.com Website: www.com locAl stAtistics Russia Mitsubishi corporation Avrora Business park 4/F.és Gázipari Nyrt. and Bulgaria. and retail networks in the US. Head of the Main Division of Oil and Gas Pro: Mr Vladimir Mulyak locAl stAtistics petroAlliance services company limited Narodnogo Opolcheniya ul d 40/3 Moscow 123298 Russia Tel: +7 (495) 797 9393 Fax: +7 (495) 797 9397 Email: pas@petroal. Azerbaijan. Mitsubishi has offices in Moscow and Yuzhno-Sakhalinsk. Timan Pechora and the North Caspian regions.ru Website: www.mol. Moldova. the third largest private oil company in the world in terms of reserves.Russia Oil & Gas Competitive Intelligence Report 2010 inDustry clAssificAtion Chemicals Petrochemicals Oil & Gas Construction/Engineering Mining Russia Russia Tel: +7 (495) 967 6805 Fax: +7 (495) 967 6806 Email: info@rus. The company recently carried out a feasibility study on the reduction of carbon-dioxide emissions at the Konakovo Power Station. Lithuania.3 bn barrels of oil equivalent in proven reserves. The bulk of the company’s exploration and production assets are located in Western Siberia. Head of the Main Division of Supplies and Sa: Mr Valery Subbotin VP. The company is also developing sources of liquefied natural gas in Russia.

ru Key presonnel nAtionAlity/trADe AfiliAtion Netherlands United Kingdom Subsidiary of Royal Dutch Shell plc.Strategy & New Business Development: Mr Stanislav Miroshnik General Management Vice President .com Key presonnel technological solution Naberezhnaya Obvodnogo Canala 14 Sankt-Peterburg St Petersburg 192019 Russia Tel: +7 (812) 365 4406 Fax: +7 (812) 365 4407 Email: infost@quantum.technosol.sibirenergy.Russia Oil & Gas Competitive Intelligence Report 2010 shell exploration & production services (rf) Bv Novinsky Boulevard 31 Moscow 123242 Russia Tel: +7 (495) 792 3550 Fax: +7 (495) 792 3553 Email: customersupport@shell. inDustry clAssificAtion Surgutneftegas (Russia) is the country’s third largest upstream oil producer. Block 2. but also has interests in related products. producing approximately 13% of the country’s total output. Industry Classification Oil & Gas nAtionAlity/trADe AfiliAtion Russia Oil & Gas Exploration Manufacture Exploration/Extraction Recycling/Treatment Refining/Processing Services tatneft Jsc 75. Subsidiary of Statoil ASA (Norway). 1 Surgut Tyumen 628400 Russia Tel: +7 (346) 242 6133 Fax: +7 (346) 242 6494 Email: secret_b@surgutneftegas. which are owned and operated by Statoil Nefto. inDustry clAssificAtion Oil & Gas nAtionAlity/trADe AfiliAtion United Kingdom Subsidiary of Sibir Energy plc.ru Website: www.com locAl stAtistics CEO: Mr Shafagat Fakhrazovich Takhautdinov Deputy General Director: Mr Vladimir Pavlovich Lavushchenko General Management Deputy General Director & Chief Geologist: Mr Rais Salikhovich Khisamov General Management First Deputy General Director & Head of Crude & Oil Products: Mr Nail Ulfatovich Maganov First Deputy General Director .shell.ru Website: www.surgutneftegas. Norway Vice President . Netherlands sibir energy plc 31 Novinsky Boulevard.com Key presonnel surgutneftegas Kukuevitskogo ul.ru locAl stAtistics General Director: Mr Christopher Finlayson General Management Public Affairs Manager: Mr Maxim Shoob General Management locAl stAtistics Established: 1993 Established: n/a Business Activity Business Activity Shell Exploration & Production Services (RF) BV (Russia) explores and produces hydrocarbon resources and associated infrastructure and pipeline projects. In the longer term. such as motor fuels and lubricants. Lenin Street Almetyevsk Tatarstan 423450 Russia Tel: +7 (855) 337 1111 Fax: +7 (8553) 376 151 Email: tnr@tatneft. Shell Global Solutions is also based at the above Moscow office and provides a consultancy service to corporate clients. inDustry clAssificAtion Oil & Gas Transport Natural Gas Oil/Petroleum Exploration/Extraction Refining/Processing nAtionAlity/trADe AfiliAtion Norway Subsidiary of Statoil-Den Norske Stats Oljeselskap AS.statoilhydro. 6/F Moscow 123242 Russia Tel: +7 (495) 790 7840 Fax: +7 (495) 790 7831 Email: information@sibirenergy. the company hopes to have ten service stations on the Kola peninsula in north-western Russia. The company has 5.Technology: Mr Francis Sommer Acting Managing Director: Mr Mihail Fridman Executive Director: Mr Herman Han Executive Director: Mr Victor Vekselberg Operations Director: Mr Bill Schreider Finance Director: Mr Jonathan Miuir Business Assurance Director: Mr Anatoly Temkin © Business Monitor International Ltd Page 88 .ru Website: www.com Website: www.tnk-bp.com Website: www. d.tatneft.ru locAl stAtistics Governmental Affiairs Director: Mr Alexander Levshov Senior Management Business Development Manager: Mr Evgeny Borisov Finance Manager: Mr Michal Kolodziejczyk Asset Manager: Mr Per Kjaernes Head of Industrial Relations: Mr Benedikt Henriksen Head of Operations: Mr Bjorn Ingar Tollefsen Exploration Manager: Mr John K Milne Public Affairs Manager: Mrs Natalia Krasilnikova Human Resources Director: Mr Aslak Sviland locAl stAtistics Established: n/a Oil & Gas inDustry clAssificAtion nAtionAlity/trADe AfiliAtion Russia United Kingdom Distributor for BP plc. Paveletskaya Square Moscow 115054 Russia Tel: +7 (495) 967 3818 Fax: +7 (495) 967 3824 Website: www. located in the Republic of Tatarstan and produces around 8% of Russia’s total crude output.com Key presonnel Statoil (Russia) specialises in oil and gas exploration and production.5bn barrels of proved oil reserves. United Kingdom Established: 1991 No of Employees: 30 Business Activity tnK-Bp 1 Arbat Street Moscow 119019 Russia Tel: +7 (495) 777 7707 Fax: +7 (495) 777 7708 Email: company@tnk-bp.Production: Mr Nail Gabdulbarievich Ibraghimov Finance Director: Mr Evgeny Tikhturov locAl stAtistics Established: n/a Established: 1950 No of Employees: 74858 Business Activity Business Activity Sibir Energy plc (Russia) is an independent oil and gas production company with a pure Russian focus as 100% of its reserves and crude oil production comes from the oil-rich Khanty Mansiysk Region in Western Siberia. United Kingdom Oil & Gas Oil/Petroleum Exploration/Extraction Russia nAtionAlity/trADe AfiliAtion statoil russia 2. The company has five service stations in the Murmansk region.com Website: www. inDustry clAssificAtion Tatneft JSC (Russia) is active in the upstream and downstream sectors of the oil and gas industry.

supplying natural gas to 80. USG. which is the country’s first onshore production-sharing project.35bn merger of their Russian businesses.000 km of transportation pipes (or 80% of the total) nationwide. Total operates the Kharyaga project in Russia’s northern TimanPechora province. the largest gas transportation system in the world. Germany Established: 1989 Business Activity Total Moscow (Russia) is involved in the exploration and production of oil and chemical products. France Chairman: Mr Sergey Shmatko General Director: Mr Nikolay Brunich Marketing Manager: Mr Alexey Hodakov locAl stAtistics uGs World Trade Center Krasnopresnenskaja Naberezhnaya 12 Office 507 Moscow 123610 Russia Tel: +7 (495) 967 0774 Fax: +7 (495) 967 0775 Website: www. inDustry clAssificAtion Oil & Gas nAtionAlity/trADe AfiliAtion Russia USA Joint venture with Alfa Group. The group companies Elf Lubricants Russia and Bostik Findley Russia are also represented in Russia.ru Key presonnel Petrochemicals Oil & Gas Chemicals nAtionAlity/trADe AfiliAtion France Subsidiary of Total SA. United Kingdom President: Mr Reinier Zele Head of Representative Office: Mr Jurgen Moepert HR Manager: Mrs Oksana Golovchenko locAl stAtistics total Moscow 21.nestro.ru Website: www.wintershall.300 km long. 1st Tverskaya Yamskaya Street Moscow 125047 Russia Tel: +7 (495) 228 6200 Fax: +7 (495) 228 6201 Website: www. Russia Joint venture with BP plc. inDustry clAssificAtion Zarubezhneft Joint stock company Building 1. covering all stages from exploration to facilitation of oil fields on land and offshore.total.com locAl stAtistics Established: 1967 No of Employees: 260 Business Activity Zarubezhneft (Russia) is the leading foreign economic enterprise in the oil and gas industry in the country. is over 153.com Website: www. 9/1/1 Armiansky Pereulok Moscow 101990 Russia Tel: +7 (495) 748 6500 Fax: +7 (495) 748 6505 Email: nestro@nestro. after they agreed to a US$6. Norway’s Norsk Hydro (40%) and the local Nenetsk Oil Co (10%). inDustry clAssificAtion Oil & Gas Natural Gas Oil/Petroleum Refining/Processing Trade nAtionAlity/trADe AfiliAtion General Director: Mr Pierre Nerguararian locAl stAtistics Germany Representative Office for Wintershall AG. inDustry clAssificAtion Oil & Gas Russia nAtionAlity/trADe AfiliAtion © Business Monitor International Ltd Page 89 .ugs. has 263 compressor stations along the way and gas-compressor units with 44. Industry Classification Oil & Gas nAtionAlity/trADe AfiliAtion Russia Established: n/a Business Activity The mainline gas pipes forming Russia’s Unified Gas Transportation System (UGS) are owned by Gazprom.Russia Oil & Gas Competitive Intelligence Report 2010 locAl stAtistics Established: 2003 No of Employees: 113000 Business Activity Wintershall Holding AG ul Namjotkina 16. Gazprom controls over 200 regional gas distributors serving over 430. TNK-BP is the country’s third and the world’s tenth largest private sector producer of oil and gas.2 million kW aggregate power. The new 50:50 joint venture.000 cities and rural communities across Russia. Hotel-Complex Office 706 Moscow 117997 Russia Tel: +7 (495) 719 8689 Fax: +7 (495) 719 8689 Email: info@wintershall. The Kharyaga project is being developed jointly by Total (50%). the owners of TNK. The priority fields of activities lie in the development and implementation of complex oil and gas programmes and projects abroad.de Key presonnel TNK-BP (Russia) was formed by UK-based oil major BP and the Russian financial companies Alfa Group and Access-Renova (AAR).com Key presonnel Established: 1994 Business Activity Wintershall Holding AG (Russia) is involved in oil and gas exploration and production.

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